Welcome to your December update

Dear investor, welcome to the SBS Wealth Investment Funds Investor Update for December 2024. Below you will find the latest performance data and market commentary from your SBS Wealth Investment Management Team. 

Performance data

Performance as at 30 November 2024. 

* Previously Corporate Bond Portfolio

Performance is shown after fees and before tax. For more information about how performance is calculated and more performance periods, click here. 

Market update

November was all about the US election. An emphatic win for Donald Trump and the the Republicians was taken extremely positive by the markets. The S&P500 rose 5.9% for the month, with smaller sized companies rising closer to 11%. The rest of the world was not as positive., in fact most having a disconnect with US markets. The worries of Trump imposing trade tariffs affected markets around the rest of the world. Asia, including Japan, fell around 1%, Europe -1.8% and emerging markets -3%. 

US equities were buoyed by expectations that Trumps policy programme will lift growth, lower taxes and cut regulation. Plus, winning the Presidency and taking control of Congress, could make it easier for him to implement his campaign promises. 

Closer to home the Australian market rose 4%, to a new record high, while the New Zealand market advanced 3.4%. The Australian stockmarket was led by Technology, up 10% and Utilities +9%. Th only negative sectors were Materials and Energy (both underweight sectors within our KiwiSaver Scheme). The New Zealand market was driven up mainly by the larger cap stocks. 

The Federal Reserve lowered interest rates by 25 basis points at its November meeting. The policy setting FOMC said that labour market conditions had generally eased, and that inflation was still “somewhat elevated”. Euro area annual inflation numbers in November were slightly higher than October. However, the rise is unlikely to derail the ECB monetary policy easing, and we expect interest rates to lower in December. The Bank of England also cut the Bank Rate by a further 25 basis points. 

The RBNZ delivered its expected 50 basis point cut to the official cash rate (OCR), signalling a high probability of more sizable cuts. This was extremely positive for the local bond market, with bond returns of around 1-2% for November. 

Within the World Equity Portfolio, the performance of the underlying stocks was positively skewed to those stocks and sectors that pundits thought would benefit from a Red house. Elon Musk became one of Trumps best buddies, leading to Tesla climbing almost 40% for the month. Other consumer discretionary stocks to perform well were Sony +15%, Amazon +12%, and Home Depot +10%. Disney also had a great month, +23%. Financials benefited, with Bank of America up 14%, JP Morgan Chase +13% and Visa +10%. Consumer Staples also had a good month, with Walmart +14% and Procter & Gamble 9%. Conversely Healthcare stocks and semiconductors slightly underperformed. 

The Portfolio also captured the growth in smaller capitalisation companies and utilities, through our holding in the Dimensional Global Sustainability PIE and the Kernel Global Infrastructure PIE. This strong performance, coupled with the strong US dollar led to the World Equity Portfolio returning a positive 5.11% for November, and an impressive 27.34% for the last twelve months. 

Within the Australasian Equity Portfolio, the larger stocks in New Zealand did particularly well. Auckland International Airport gained 6% for the month, Healthcare stock F&P Healthcare and EBOS both up over 4%, as did utility stocks Contact Energy and Meridian Energy. The returns were boosted by some outstanding results from Australian stocks, notably tech company Xero +16.4%, Financials CBA +11.2%, WBC 7.4%, and a newish position in QBE Insurance +16.3%. 

The Portfolio also captured the growth in smaller capitalisation companies and utilities, through our holding in the Dimensional Australian Sustainability. The return for the Portfolio for November was +3.33% and 15.59% for the last year. 

Within the World Bond Portfolio, investors benefited from global bond markets positive reaction to the Red wave in America. Long-dated bonds fell during the month, leading to a positive return from global bonds. Corporate bond spreads generally tightened across the Board. US bonds were positively influenced by Trump’s expected pro-business policies and tax cuts aimed at stimulating growth. In contrast, European bond spreads widened, negatively impacted by the political turmoil in France and structural economic challenges in Germany. The Portfolio gained the benefit of long-term global interest rates falling slightly, through the Dimensional Global Bond Sustainability PIE and iShares Global Agg ESG ETF, and returnd 0.93% for November. 

The New Zealand Bond Portfolio didn’t return quite as much as World Bond Portfolio. This is due to the overall duration of NZ bonds being almost 3 years less than the global bond PIEs. The return for the Portfolio was +0.65% for November and a very healthy 8.34% for the twelve-month period, whilst remaining conservatively invested in fixed interest assets.  

All strategies were positive for the month. However, as they did in October, the strategies with more equities performed better in November than the Conservative strategy, which favours more fixed interest investments.  Refer to World Equity and Australasian Equity commentary above for which stocks benefited most for High Growth and Growth strategies. Over the last three months all strategies remain in positive territory, up between 2.5%-6.6%.