News.

Sharemarkets weakened for a second consecutive month in March, eliminating gains recorded in January. Major indices fell, the S&P 500 returned -2.69%, the FTSE 100 fell -2.54%, and the ASX 200 was down -4.27%.

Aside from the February turbulence in equity markets, global economic growth should hold up well and inflation should remain low in 2018.

Sharemarkets got off to a rocky start with the US S&P 500 index down 4.97% for the first week in February. This fed through to the NZX which was down 2.26% over the same period but managed to claw back most of that by the end of the month, to finish down -0.8%.

Although we believe price pressures will ultimately remain contained in 2018 and even into 2019, there is scope for expectations of inflation to rise further as economic growth continues and central banks move towards monetary normalisation.

It is hard to see the excellent market returns of 2017 being replicated in 2018. Nevertheless, we do not see that we are in “bubble” territory just yet.

Although the economic outlook is positive for 2018, we are fully aware that sharemarkets have risen sharply in recent years and valuations are high. Consequently, we will continue to monitor economic and political developments for any negative signals.