Monthly View.

The New Zealand share market enjoyed a positive April with the S&P/NZX 50 Gross index up 1.4%. April’s better return was insufficient to offset the declines in the prior two months.

March was a month of further gains for equity markets locally and globally, while bond markets were flat or negative for the period. Read on for our expectations of these asset classes over the near term.

The prospect of increasing inflation should not be regarded as uniformly negative for markets. Central banks have been striving to encourage modest inflation for several years.

Share markets were subject to a variety of unusual circumstances in January. Although the events of the month were tumultuous the New Zealand market ended the month marginally positive.

The United States and Europe had a resurgence of COVID 19 cases in November leading to a second round of lockdowns in Europe and increased social distancing in the US.

Both the New Zealand and Australian share markets had a positive month. In New Zealand companies with 30 June balance dates reported in October.

Interest rates fell over the month of September and for the first time in New Zealand some market rates went negative. Into the tail end of the month government bonds with maturities out to 5 years were providing negative yields. This implies that a purchaser of these bonds, if they held to maturity, would receive a negative return on their investment.

August is the peak reporting season for companies with a June balance date. It is the first period that included the effects of the COVID-19 virus and an opportunity for investors to reassess the outlook for companies.

Fixed Interest investors and share investors adopted diametrically opposed positions in the month. Fixed interest investors continued to drive down interest rates as demand for fixed interest products remained strong.

Investor returns in the June quarter have been very strong. Economists have argued that share markets have become disconnected from real world conditions. While these concerns are valid there are also grounds for the rebound as a business recovery is underway and massive liquidity has been injected into the financial system.