Insights
Market Review for April
April markets were down overall but some companies reported making a good return for investors and the planet.
Over April the US market dropped by 4%, Australia by 2.9%, and New Zealand's by 1.2%. Most of our investment funds lost some value, except for the Trans-Tasman Fund, which did a little better thanks to good news from some of the companies within the portfolio.
US market
For the first time in five months, the US stock market didn't gain value. This is somewhat expected after such a strong performance since last October, where the S&P 500 increased more than 20% for the period. Since the start of the year about 80% of US companies that announced profit results did better than analysts’, and the market, were expecting. This was driven by a combination of steady sales growth and profit margins rising to the highest level in nearly two years.
The mega-cap companies and other tech stocks have continued to remain strong. For instance, Apple did better than expected thanks to increasing demand in China and despite raising their dividend as well as announcing a plan to buy back $110 billion of their stock. Google surged on announcing its first dividend and a $70 billion buy back.
Comments from the Chair of the US Federal Reserve about inflation and higher interest rates have made investors nervous. Although markets have held up better than expected, there will always be a tipping point for activity and confidence when it comes to balancing interest rates and inflation. An escalation in geopolitical tension added to uncertainty last month.
Trans-Tasman markets
New Zealand inflation is proving to be stickier than desired, but rising unemployment statistics have increased hopes that interest rate cuts from the Reserve Bank may come sooner. The most recent unemployment data showed a clear weakening, increasing to 4.3% compared to 4.0% during the December 2023 quarter. This upward trend began in mid-2022. Here at Pathfinder, we believe inflation rates might stay high for a while longer due to wage increases still being uncomfortably high for consistently low and stable inflation. The most recent data shows that inflation is still running around 4% year on year, well above the Reserve Bank target.
In Australia, rapid net migration is fueling inflation, leading some market commentators to think that the Reserve Bank of Australia should increase interest rates.
Good news from our investments
SciDev
One of the reasons our Ethical Trans-Tasman Fund did well is because of an Australian company called SciDev, which saw its stock price jump over 50% after a good quarterly update. SciDev brings together world-class technology and science to solve pressing operational and environmental issues like cleaning up the mess left behind by the mining, oil, gas and constructions sectors.
SciDev have treated over 7 billion litres of water to date (the equivalent of nearly 3,000 Olympic swimming pools). They are also an industry leader in PFAS contamination found in drinking water. New regulations in the US could mean big opportunities for SciDev as they report that up to 100 million people may be exposed to drinking water above the current PFAS limit. Note our Global Water Fund also invests in SciDev.
Equinix
Staying with the water theme, we were recently impressed by some data from a large-scale global data centre provider called Equinix. Their technological innovation is having an impact. It includes: -
- Saving 37 billion gallons (approximately 140 billion litres) of water a year since 2020.
- Reporting that although their energy consumption increased by 36%, their scope 1 and Scope 2 greenhouse gas emissions went down 23%.
- Exploring on-site power generation methods such as hydrogen fuel cells that consume no water at all.
Note our Pathfinder KiwiSaver Plan, Global Responsibility Fund and Global Property Fund invest in Equinix.
In summary, while the markets have been a bit sluggish, there are still some positive developments in our investments that give us hope for the future.
Jargon buster
Mega cap is a designation for the largest companies in the investment universe as measured by market capitalisation. While the exact thresholds change with market conditions, mega cap generally refers to companies with a market capitalisation above $200 billion.
Tailwind refers to factors that help increase growth or cause positive effects on profits and revenue. It is the opposite of a headwind, which slows down growth or causes negative effects.
Performance
Keep up to date with our performance here.
Hamesh joined Pathfinder in April 2019 and primarily manages Australasian equities. Hamesh has 10 years’ financial markets experience, beginning his career as an analyst in the investment strategy team at Goldman Sachs JBWere, after a summer at the Reserve Bank of New Zealand. Prior to Pathfinder, he co-founded an independent stock market research firm. Hamesh holds a BCom (Hons)/LLB from Auckland University.
