Selected Market Indicators for Periods Ended 30 September 2019

Global markets were once again able to slip into a “goldilocks” phase of accommodative monetary policy and easing trade conflict over September, creating the perfect (albeit downside-sensitive) environment for an equity rally.

Investor preferences shifted back into growth assets over the month, reminding investors that the woes of one month will not necessarily carry forward into the one that follows. 
 
Developed equity markets presented positive returns for September, with the MSCI World Index returning +2.3% in local currency (+2.7% in unhedged New Zealand dollars). The rebound of NZ (+1.8%) and Australian (+1.8%) equities was below that of their global counterparts, whilst the Global Listed Property (+2.6%) and Infrastructure (+1.9%) sectors continued to offer robust returns. Bond market yields rose over the month, losing value as investor preference favoured equities; Global Aggregate Bonds (-0.6%) delivered negative returns.  
 
An estimate of the Balanced Fund gross index return based on selected market indicators for September is +1.04%.  
 
Significant developments include:
 

• The United States Federal Reserve cut the target range for the Federal Funds rate to 1.75%–2.00%, in line with market expectations. Despite a strong US labour market and moderate economic activity, inflationary pressures have been muted and global trade tension remains heightened. The Fed is one of twenty major central banks who have eased this year.
• The Reserve Bank of New Zealand left the Official Cash Rate (OCR) unchanged at 1.0% at its Monetary Policy Committee meeting on September 25. They provided an undertone in their accompanying statement, suggesting that there “remains scope for more fiscal and monetary stimulus”, adding pressure on policymakers to use fiscal policy to support the domestic economic environment.
• Oil prices spiked as much as 20 percent after substantial supply disruption following attacks in Saudi Arabia, eradicating more than half of the kingdom’s production and five percent of global supply. The attacks showcased yet another trial for a global economy already stricken by waning industrial activity and notable trade pressures

 
Trans-Tasman Equities
The NZ and Australian share markets both rose +1.8% over the month, with the ASX managing to 
keep up with its Trans-Tasman counterpart for the first time since May. The annual returns of both 
countries remain comfortably in the double-digits, benefitting from the pause in trade tensions 
between the US and China and very low interest rates over the past year.
 
Global Equities
Developed equity markets (+2.3%) enjoyed a rebound, gaining as investors embraced easing trade 
tensions and ongoing policy support, compounded by resilient US consumer spending. Emerging 
markets were no exception, pushing through geopolitical spillovers in Argentina and Hong Kong to 
finish the month up +1.5%. 
 
Property and Infrastructure
The global listed property and infrastructure sectors delivered healthy returns of +2.6% and +1.9% 
(NZD hedged) on the back of a continued investor search for defensively-inclined growth assets. 
Over the last 12-months they are up +13.7% and +18.5% respectively, outperforming nearly all of 
their developed equity counterparts.
 
NZ Bonds and Cash
NZ Composite Bonds (-0.04%) were marginally down as yields rose and general risk aversion eased. 
The 10-year bond yield continued its rebound from its record low touched in August, finishing the 
month at 1.09%, while its Australian counterpart maintained a similar storyline, finishing September 
at 1.02%. 
 
Global Bonds
Global aggregate bonds were down -0.6% over the month, losing value as investor preferences 
shifted back into growth assets. Despite short-term losses, both government and corporate bonds 
12-month returns remain above long-term averages, up +11.1% and +11.0% over the past year. US 
Treasury yields rose over the month, with the 10-year bond yield ending September at 1.70%. 
 
Currency
The New Zealand dollar continued to slide against most major currencies over the month, motivated 
by policy uncertainty and the prevalence of local downside risks. The most prominent movements 
came against the GBP (-1.7%) and AUD (-0.7%). A comparatively strong US economy saw the NZD 
falling to a three-year low against the USD.