Market review - quarter ending 30 June 2019

from Russell Investments, UniSaver’s investment manager and consultant

Most major markets continued their strong performance during the second quarter, with global shares advancing 3.1% (as measured by the MSCI All Country World Index NZ dollar hedged) [1]. Despite clouds on the horizon from an economic growth perspective, and ongoing concerns around global trade, sentiment has generally remained positive as investors bet that central banks around the world would continue to adopt expansionary monetary policies, such as lowering interest rates.

With interest rates edging lower, global fixed interest markets also performed strongly returning 2.7% as measured by the Bloomberg Barclays Global Aggregate Index NZ dollar hedged.

The New Zealand share market hit all-time highs and ended the June quarter up 6.8% as measured by the S&P/NZX 50 Index. Local shares benefited from the Reserve Bank of New Zealand’s decision to cut the base rate to 1.5%, as policy makers reacted to weaker economic growth forecasts and softening business confidence. Investors are currently pricing in further rate cuts in New Zealand, although that will depend on economic conditions. 

The NZ dollar weakened slightly during the quarter, with lower interest rates and the prospect for weaker growth in New Zealand weighing on the minds of international investors.

How did markets affect UniSaver’s investment options?

All UniSaver investment options performed solidly during the second quarter as the major asset classes delivered strong returns. Global infrastructure and Australasian shares were the strongest segments within the UniSaver portfolios. Given the strong performance of shares, the investment options with greater exposure to growth assets outperformed the more cautious options like cash and the conservative strategy.

Longer-term returns of all UniSaver options have been solid and broadly in line with objectives, again with the more growth-oriented strategies delivering higher returns than the more conservative strategies.

Outlook

Share markets around the world have surged higher in 2019 despite slowing economic growth and global trade tensions. Fixed interest returns have also been strong as interest rates around the world have generally declined in the face of slowing economic growth. The current economic expansion in the US is the longest on record and with share markets at record levels, slowing global growth and ongoing geopolitical concerns, Russell Investments’ strategists remain cautious, particularly with respect to US shares. While caution is warranted, the potential for upside surprises remains as economic fundamentals in much of the world are solid, monetary policy is generally accommodative and a near-term resolution in the trade negotiations between the US and China remains a possibility.   

The information contained in this publication was prepared by Russell Investment Group Limited (RIG). RIG is the investment manager for UniSaver.  This publication has been compiled from sources considered to be reliable, but is not guaranteed. This publication provides general information only and should not be relied upon in making an investment decision. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. All investments are subject to risks. Past performance is not a reliable indicator of future performance.

Copyright © 2019 Russell Investments. All rights reserved. This information contained on this publication is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments.



[1] Hedging is a tool used to reduce the effects of changes in exchange rates on investment returns. The scheme’s international investments are largely hedged, which means our returns are not significantly affected by currency movements.

 

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