Selected Market Indicators for Periods Ended 30 November 2018 

Despite persistent volatility throughout the month, the majority of equity markets across North America and the Pacific clawed backed some of their October losses in November, posting positive returns for the month (in local currency).

Australia was a notable exception, struggling alongside most European markets, including the UK. Negative investor sentiment in the wake of October’s dramatic falls, continues to be fuelled by signs of slowing economic and corporate earnings growth, tightening monetary policy and ongoing China-US trade tensions.

The MSCI World Index, representing developed equity markets, rose +1.2% over the month in local currency terms. The unhedged return (-3.9%) was negative as the NZ dollar rallied strongly. The NZ market performed broadly in line with global markets, closing the month up +0.9%. Global Government Bonds (+0.6%) delivered a positive return, while Global Credit had another negative month, returning -0.3%. Global Aggregate Bonds returned +0.4%. Global Listed Property and Global Listed Infrastructure markets outperformed the broader global market again in November, returning +3.6% and +2.7% respectively.

An estimate of a Balanced Fund gross index return based on selected market indicators for November is +0.3%.

Noteworthy developments include:
 

• The US mid-term elections were held on 6 November 2018. Unlike the last US Presidential election, the mid-terms went largely as expected, with the Republicans maintaining control of the Senate, but losing control of the House of Representatives. The Democrats now have the ability to stall the conservative legislative agenda, as well as increase scrutiny on the President and his administration.
• Theresa May and the European Union agreed to a Brexit deal in late November. The deal will need to be approved in the UK parliament’s House of Commons before it can become official.
• Concerns are mounting that the meteoric rise in tech company valuations might be ending; each of the FAANG stocks (Facebook Apple, Amazon, Netflix and Google) experienced wild price swings during the month, with single day movements of between +6.9% and -6.6%.
• The G20 summit, held on 30 November and 1 December resulted in a 90 day truce between China and the US in order to formalise a trade agreement. If an agreement is not met, the US will follow through with threats of increased tariffs.
   

Trans-Tasman Equities
The NZX50 experienced a lift alongside global markets, returning +0.9% for the month. The ASX200 experienced a near two year low, weighed down by the banking sector that remains under scrutiny from the Royal Commission investigation. This month of negative returns pulled  the ASX200 one year return into negative territory (-1.0%), compared to +8.9% from the NZ market.

Global Equities
Global markets continued to be volatile over the month, but finished in the black at month end (+1.2% in local currency).  A rally in the NZ dollar resulted in a negative return (-3.9%) for unhedged NZ investors. Emerging markets rebounded from its large fall in October, returning +3.0% (local currency), responding positively to the possibility of slower rate hikes in the US.

Property and Infrastructure
Hints at a slower pace of interest rate increases also sat well with the more yield sensitive Global Listed Property and Infrastructure  sectors, which outpaced broader equity markets over the month, returning +3.6% and +2.7% respectively. The one year returns for both sectors are in positive territory, with Global Listed Property (+3.5%) ahead of developed equity markets.

NZ Bonds and Cash
New Zealand Government and Corporate Bonds also experienced high volatility during November; the 10 year bond yield ranged between 2.54% and 2.84% over the month, before finishing at 2.59%.  NZ Government and Corporate Bonds returned 0.0% and -0.1% respectively. The NZ Cash return fell below 2% for the 12 months to 30 November.

Global Bonds
Global Bonds regained some momentum in late November, as Fed Chairman, Jerome Powell, suggested that interest rates were now close to neutral, a far cry from remarks he made back in September. Global Government Bonds responded positively (up +0.6%), while Global Credit fell (-0.3%). Global Aggregate Bonds rose by +0.4%.

Currency
The NZ dollar rose strongly over the month, rising against all major overseas currencies. The largest gain was against the Japanese yen (+5.8%), with gains against the British pound (+5.3%) and the euro (+5.3%) in similar territory. The NZ dollar also experienced significant gains against the US dollar (+5.2%), appreciating against the greenback for only the second time in 10 months, and closing out November at USD 0.6872.