Central banks remain cautious and increasingly dovish with many of the rate hikes penciled in for 2019 being shelved. The US Federal Reserve had previously indicated there would be two rate hikes this year and one in 2020.
Our own Reserve Bank is tipped to cut the official cash rate (OCR) this year despite our own interest rates already being at historically low levels. Bank economists are starting to tip a 50-basis point (0.50%) cut to the OCR. This would mean our central interest rate would be 1.25%.
NZ’s bond yields are the lowest they have ever been and our term deposit rates continue to fall. The lower term deposit rates on offer are forcing those who traditionally keep funds in bank deposits to look towards the share market and high dividend paying shares to compensate for their diminishing income. In doing this, investors are forsaking capital security in pursuit of higher income and variable capital returns.
One positive for falling interest rates is the return from bonds actually increases. Investors with larger exposures to bonds have done particularly well over the last 12 months. The NZ Government Stock has returned approximately 6.4% which coincidentally is the same as global equities in NZ dollar terms.
On the domestic equity scene, interest rate sensitive stocks such as Contact Energy and Meridian were some of the best performers. Kathmandu continues to be a drag on the index with the stock down 9% during the month. Overall, our domestic market continues to be resilient and set another record high.
In contrast, the Australian market was flat as the major banks came under pressure. Australian mining stocks are benefiting from the spike in iron ore prices following the Brazilian dam disaster. Prices remain high as the Chinese government tries to stimulate its economic growth.
Global stock markets have recovered from the disastrous end to 2018. US stocks as measured by the S&P500 index are up 13% for the quarter and the broader MSCI World Index up over 10%. Of the major indices, only the Japanese market was negative over March. UK & European market returns continue to lag as the Brexit debacle drags on.
The NZ dollar fell sharply (around 2%) following the latest RBNZ meeting and interest rate commentary. The Kiwi fell between 0.4% to 1.1% against a majority of our major trading currencies. The Kiwi-Aussie rate was basically unchanged.
The following fund data is to 31 March 2019. Note these returns are before tax, and the $30 per annum member fee but after the 0.3% per annum management fee.
|Simplicity Growth Fund||01.09.16||9.85%||2.37%||9.53%||0.85%||9.24%||9.46%|
|Simplicity Balanced Fund||01.09.16||7.13%||2.18%||7.55%||1.80%||8.17%||7.70%|
|Simplicity Conservative Fund||01.09.16||5.15%||1.95%||4.66%||3.51%||6.95%||5.80%|
|Simplicity Guaranteed Income Fund||24.10.17||5.58%||1.84%||6.44%||1.91%||7.04%|
|Simplicity Growth Investment Fund||03.04.17||8.86%||2.39%||9.59%||1.07%||9.51%|
|Simplicity Balanced InvestmentFund||03.04.17||7.09%||2.15%||7.73%||1.95%||8.19%|
|Simplicity Conservative InvestmentFund||03.04.17||5.30%||1.95%||4.71%||3.52%||7.00%|
|Simplicity NZ Bond Fund||03.04.18||7.64%||1.86%||3.16%||4.72%||7.64%|
|Simplicity NZ Share Fund||03.04.18||19.69%||5.77%||11.60%||5.59%||19.69%||
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.
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