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"As January goes, so goes the year": Simplicity Market Commentary

After the worst December month since 1931, the woes of last year were left behind as stock markets rebounded strongly. There is an old Wall Street adage “as January goes, so goes the year”, so here’s hoping for a better year ahead. 

The market recovery in January reversed a large proportion of December’s decline however, investors continue to be bombarded with negative headlines, notably Brexit, the US government shutdown, US-China trade talks and disputes.). Reading too much into the headlines and not thinking about your own goals and objectives is always dangerous. Remember headlines are deliberately overdramatic, after all, if they were boring no one would read the story.

Active managers who had higher cash positions in their funds heading into the holiday season, thinking they would be off to the beach, will be kicking themselves as they missed out on a good portion of the rebound. 

All major global share markets were higher over January with the S&P 500 index up 7.9%; the German market up 5.8%; UK rose 3.6%; Japan rose 3.8%. The New Zealand sharemarket return dwarfed in comparison at +2%. Across the ditch, in Australia, they had their best start to a year in 5 years, up nearly 4%.

Fixed Income (cash and bonds) yields continue to languish at around 2018 lows. There is no rate hike in the NZ Official Cash Rate (OCR) in the foreseeable future so the returns from fixed-income assets are likely to remain lower for longer. Investors holding cash or term deposits will be getting used to sub 4% returns before tax.

The NZ government bond 5-year yield hovered around the Official Cash Rate (OCR) and the 10-year yields just over 2.25% as at the end of January. Australian 10-year government bonds have been tracking their Kiwi cousins closely with their 10-year government bond yielding around the 2.25% level. Despite all the drama in the US, their 10-year treasury bond is yielding around 0.4% more than the NZ equivalent.  

The US Federal Reserve has softened its position on further rate hikes with the rhetoric coming out of the committee softening and being on a more wait and see what is appropriate at the time stance. 

Fund returns  

The following fund data is to 31 January 2019. Note these returns are before tax, and the $30 per annum member fee but after the 0.3% per annum management fee. 

 

Name

Since Inception

Inception
Date

Since Inception
Annualised

1 

Month

3

 Months

6 

Months

1 

Year

2 

Years Annualised

KiwiSaver scheme

 

 

 

 

 

 

 

 

Simplicity Growth Fund

21.18%

01.09.16

8.27%

4.15%

1.03%

-1.98%

0.07%

8.60%

Simplicity Balanced Fund

14.61%

01.09.16

5.80%

3.19%

1.36%

-0.68%

2.01%

6.91%

Simplicity Conservative Fund

10.60%

01.09.16

4.25%

1.67%

1.91%

1.54%

3.94%

5.08%

Simplicity Guaranteed Income Fund

4.30%

24.10.17

3.37%

2.71%

1.28%

-0.39%

1.72%

 

 

 

 

 

 

 

 

 

 

Investment Funds

 

 

 

 

 

 

 

 

Simplicity Growth Investment Fund

12.30%

03.04.17

6.63%

4.12%

1.04%

-1.87%

0.27%

 

Simplicity Balanced Investment Fund

9.76%

03.04.17

5.29%

3.31%

1.55%

-0.56%

2.01%

 

Simplicity Conservative Investment Fund

7.56%

03.04.17

4.11%

1.72%

1.96%

1.59%

3.88%

 

Simplicity NZ Bond Fund

5.01%

03.04.18

6.00%

0.64%

1.69%

3.36%

 

 

Simplicity NZ Share Fund

9.06%

03.04.18

10.90%

1.69%

2.72%

1.29%

 

 

 A note on returns. From time to time there will be small differences in the returns between the KiwiSaver scheme and Investment Fund returns. Some of the differences can be attributed to either small differences in asset allocation, timing and reinvestment of cash flows and transaction costs (i.e. brokerage) or a combination of these factors. Past returns are not a guide to future potential returns.