Inflation concerns behind fall in returns

Market update from Russell Investments, UniSaver’s investment manager and consultant. 

Global and domestic share markets have fallen recently, mainly due to stubbornly high inflation which is contributing to increasing interest rates and fuelling concerns about an eventual recession. This market weakness was in spite of general solid earnings results from companies and a very resilient consumer typified by low rates of unemployment in many major markets including New Zealand. 

Increasing interest rates often leads to negative returns for bonds, because bond prices fall when yields rise. This has led to a challenging period for fixed interest investors, however with higher bond yields now the outlook for future returns from the asset class is much improved. Share markets weakness has been driven by interest-rate sensitive sectors, such as utilities, as well as the more growth-oriented technology and consumer discretionary companies, many of which have been trading at high valuations. Investors are currently focused on the future path of interest rates and inflation which will impact the consumer and corporate earnings as well as the ever-present geopolitical concerns.

While most members in the UniSaver scheme will have experienced negative returns recently, it is timely to remember that periods of poor performance are inevitable when investing and that saving for retirement is a long-term game, where patience and sticking to a plan has historically been rewarded.

See the latest returns

Read Russell Investments' commentary on the September 2023 quarter

Posted 16 October 2023.