Published on 17/07/2023
The biggest, boldest headlines marking June centered around New Zealand finally, ‘technically’ entering into a recession. But are we really doomed, and what exactly does this mean? A technical recession happens when the economy records two quarters of negative GDP growth in a row. In a nutshell, businesses are producing less goods and services, while consumers are cutting spending - causing the economy to slow down. And although this may seem pretty scary, there’s two things to note here:
No one knows how deep this recession will go, or exactly what’s next. Although it’s good to be prepared in general (for example having a rainy day fund and to be mindful of your overall expenses - aka budget), there’s no point panicking. As many experts will tell you, it’s about staying the course, remembering that investment markets are essentially “on sale” during a downturn, and that time in the market beats timing the market.
June marked the end of the first half of 2023 - and markets have been unexpectedly buoyant with around 14% growth over this period, despite the ongoing headwinds around inflation, interest rates, war and more.
Investors appear to be getting more positive about the economy, and global interest rates are starting to level off. Excitement in June around AI and technology has been leading a surge in the stock prices of some global tech companies in particular.
New Zealand’s share market performance, which doesn’t have the level of IT (or consumer product) stocks as our international counterparts, hasn’t seen the same uplift - the NZX50 was relatively flat in June (up around 0.9% in local currency), but we’re still looking more positive than 2022, with a 3.5% increase YTD.
The bond market, which was hit pretty hard in 2022, hasn’t seen the same level of recovery as the share market but at least interest rates have been more stable than they were in the previous couple of years.
So what will the back half of 2023 bring?
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