Welcome to your November update

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

Performance data

Performance as at 31 October 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

The US Federal Reserve (Fed) surprised markets in September, cutting interest rates by 0.50%. Firstly, this was the first cut in four years, and secondly, the market was 50/50 on whether they would start with 0.25% or 0.50%. The Fed Chair Powell emphasised this being a proactive move, and not due to recession fears. They believe inflation is no longer a concern and are now focusing on the labour market.

Equity markets started September as they have done for a number of years, going backwards (note September is traditionally the worst performing month for equities). However, better inflation figures, the surprise Fed rate cut and further interest rate cuts in several European countries, was a positive boost and led to many share markets ending the month in positive territory. Asia led the way, with China up 21.6%, reversing many months of underperformance. An 800 billion Yuan liquidity boost by the government and rate cuts on lending and liquidity facilities stimulated the market. Australia up 3% (led by Material stocks and IT), the US up 2.1% on the back of strong returns from Utilities, Consumer Discretionary and Communication Services.

European markets were slightly negative, predominantly due to a poor UK share market (-1.6%). Within Europe itself, Healthcare was the main detractor down –7%. Further afield the Japanese share market was down 1.6%, again Healthcare and Real Estate the main detractors.

The surprise cut by the US Fed and the anticipated further cuts by several other central banks was positive news for the World Bond Portfolio, resulting in a positive return for September of 0.88%. and an impressive 3.02% for the quarter. The portfolio increased its duration during the month, gaining the benefit of falling rates. However, we remain slightly cautious as to the speed of further rate cuts and the amount that has already been factored into the markets.

A benign New Zealand bond market meant the New Zealand Bond Portfolio accrued mainly the interest for the month, although some small capital gains led to a return of 0.58% for the month. The Portfolio maintains a running yield of 4.6% and a duration of around 4.8 years.

The World Equity Portfolio produced another positive return for the month, up 0.88%, on the back of good returns from most share markets around the world. Returns were dampened a bit by the flying kiwi dollar against the US greenback. US equity returns were impacted –1.7% from us reporting the returns in New Zealand dollars. We believe the currency movements over the long-term are a net zero game, but this movement can fluctuate 10-20% over the short-term. Top performing stocks in the portfolio over the month in local currency were Tesla +25.5%, Caterpillar 10.6%, Meta 9.8%, Home Depot 9.4%. On the downside Healthcare stocks were generally negative for the month (Novo –14%, AstraZeneca –11%).

The New Zealand share market ended September relative flat. However, there was a lot of variation in underlying company returns. Infrastructure companies performed well for the Australasian Equity Portfolio, with Infratil and Port of Tauranga both up over 10%. Materials had an excellent month, with Fortescue Metals up 20%, and technology also performed well (Xero +5%). Conversely Spark fell –10%, Real Estate stocks fell around –4% and Healthcare stocks were generally negative (CSL –5.6%, F&P Healthcare –2.6%). During the month we increased our exposure to defensive stocks Contact Energy, Woolworths and Summerset, reducing exposure to Healthcare (sold Sonic) and Real Estate (sold Goodman Property Trust).

All the strategies performed well in September, with good returns from fixed interest and equities (equities dampened a bit by the strong kiwi dollar). All the strategies returned between 0.55%-0.71% for the month and have now produced over 3% for their first quarter since launch. All returns are after fees and before tax.