Riding the Bull Market

James McKelvie

In April the NZX 50 hit 10,000 points - something that was scarcely talked about as people dialled in to the weather before their Easter holiday.

This occasion was a quite a significant achievement for New Zealand markets, reaching all-time highs and returning over 250% across the last 10 years.

Since Easter, the NZX50 has added even more amidst pending trade tariffs, concerns over Chinese debt default and a resurgence in Bitcoin dominating the headlines. We've been in an environment for quite some time where Trump can shift the market with a tweet, international tech companies cut forecast earnings only to beat revised estimates, headlines report 'Stock Price Crashes' when in fact it could read 'Stock Price Crashes to Levels Not Seen Since Last Monday and Has Since Recovered'. So how bad is it?

Certainly, volatility is here, sentiment is lower than it was and there are concerns that we've had it too good for too long. Does lowering interest rates put a band aid on the economy, whilst letting too many people borrow too much money to buy too much stuff they can't later afford? Is it time to get out and stay out? After all, bond yields are low and stocks are apparently 'overpriced'.

In the short term, the more growth assets (or shares) you have, the more your portfolio will respond to these bumps in the road. In the long term, even with an event as significant as the Global Financial Crisis, your investments grow. Since the April peak in 2007 to the Easter we've just had, the NZX 50 has grown 138% to the 10,000 points for an annualised return of 7.52%. Not bad at all considering this includes the Global Financial Crisis.

It is the job of a financial planner to make sure that you can manage the bumps in the road, however big, whilst still getting the appropriate amount of long term growth. Understanding your objectives, your stage of life, your tolerance and attitude towards financial risk will allow a financial planner to help you arrange your financial house appropriately.

Findex offers more than just investment selection, we offer a full suite of financial planning services.

Reach out to your adviser for more information.