Monthly View.

Investors are considering market information as to whether to retreat to safety or continue to pursue returns from more risky positioning. October returns were driven by sentiment relating to the immediate impact of interest rate policy and the ebb and flow of US China trade negotiations. Consensus economic growth outlook improved over the month.

Equity markets were generally up in September. Gains in local currency of between 1% and 2% for the month were achieved. Australia and New Zealand recorded a photo finish in local terms. Both markets were marginally behind the S&P500’s return in local currency for the month. In New Zealand top performers included Kathmandu (+23.2%) and Fletcher Building (+16.0%). Both companies are in cyclical businesses and have operations in Australia and New Zealand.

The fall in global and local interest rates has continued over August and fixed interest investors have continued to ratchet down expectations as to where interest rates may finally settle. Downward pressure in interest rates has not been confined to those countries with positive rates. Despite the seemingly unsustainable nature negative yields became even more negative over the month.

We have previously discussed the important role monetary policy plays to support sharemarkets and stimulate economies and recent events certainly reinforce this.

Interest rates continued to decline as central banks see subdued economic activity and stubbornly low inflation as a concern for the global economy.

We have written previously about our expectations of increased volatility in markets during 2019. In May we saw some quite pronounced share market moves as a result of news locally and offshore.

In a reasonably-well telegraphed move, the Reserve Bank of New Zealand (RBNZ) lowered the Official Cash Rate (OCR) by 25 basis points to 1.5% in May. In explaining the decision, the RBNZ cited uncertainty in respect of the global economic outlook and further slowing in domestic growth from the second half of 2018.

Share markets were up during the month of March, rising domestically and in the US and Europe, but flat in Australia. Central banks around the world turned dovish (signalling that interest rates are more likely to fall than rise) in response to the prospect of slower global growth and subdued inflation.

Over February, share markets pressed on from a strong start to the year, recovering from a difficult 2018. The prospect of lower interest rates and improving US-China trade sentiment mitigated some of the key concerns investors had last year.

After a torrid December, January provided some relief for investors on summer holiday.