Insights
Market Review for October 24
Financial analysis on the global and local markets from our investment team.
Whilst it is only mid-November, markets have continued to rally from October responding well to the recent US election.
US Market
Over the course of October, the market began pricing in returns that favoured President Trump. Regular readers would note, that for ethical investors like us - holding a long-term view that green energy will continue to grow, it is unhelpful that traders were knocking solar stocks Enphase and FirstSolar (down 22-26%). Many fear that Trump will remove support offered to the renewables sector in the Inflation Reduction Act. With the US economy performing better than anticipated, it was expected that neither Harris nor Trump would show fiscal restraint, but some suggested a Trump win will be more inflationary. Long-term interest rates moved higher, with the US 10-year lifting from around 3.8% to 4.3%. Some of the best US performers in Pathfinders funds included Nvidia as the CEO talked about demand being “insane”; Digital Realty who saw record demand for its datacentre space and Fiserv who received strong payments and volume growth.
New Zealand Market
Many sighed in relief when the Reserve Bank delivered a welcome 0.50% Official Cash Rate cut to 4.75% followed by confirmation that inflation continues to moderate. Stocks in the NZX 50 (the top 50 stocks in NZ) rose 1.7% in celebration. Inflation is now sitting within the Reserve Banks 1-3% inflation target range for the first time since 2021. The best performer in our Ethical Trans-Tasman fund was Scales, a global horticulture, logistics and pet food business, who continue to build on recent success.
Australian Market
The ASX200 fell 1.3%, largely due to commodity stocks giving up their September gains, as hopes of Chinese stimulus flowing through to commodities prices seemed less likely. Australians are still waiting for signs the Reserve Bank of Australia (RBA) may shift to easing rates. Unlike New Zealand, the RBA has been battling high inflation, in part due to the structure of their labour force. Some people estimate that about 40% of Australians are covered by Collective Bargaining Agreements. These agreements usually make it slower for workers to get wage increases that keep up with inflation, because the terms are fixed, and it takes time to renegotiate them. The first interest rate cut by the RBA is not expected until May 2025.
Jargon Buster
Rally – this refers to a period of sustained increases in the price of an asset, such as stocks, bonds, or commodities. It often happens after a downturn or a period of weakness in the market. A rally indicates a broad or strong rise in prices, usually driven by positive news, strong earnings reports, or investor optimism.
S&P500 - The Standard & Poor's 500 is a stock market index that tracks the performance of 500 large, publicly traded companies in the United States. It's one of the most commonly used benchmarks for the overall U.S. stock market and is considered a good indicator of the health of the U.S. economy.
Collective Bargaining Agreements - a formal employment agreement ratified by union members and signed by the union and employer after collective bargaining. The agreement sets the terms and conditions of employment of union members whose work comes within the coverage clause of the agreement.
Performance
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Michael joined us in 2023 after being a Portfolio Manager at Mint Asset Management and prior to that at Salt Asset Management. He also spent three years as an Investment Analyst in Peru working for a Philanthropic fund and has worked for Goldman Sachs and JBWere after graduating with 1st Class Honours from Auckland University (BCom Hons Finance and Economic). Michael is a CFA Charterholder.
