Investors shrug off December concerns

People Hiking a Volcano in Fuerteventura

Market update for the quarter ending 31 March 2019.

The world economy continues to grow but it is slowing and the ups and downs in financial markets have returned after a long period of low volatility.

Following slower economic growth and lower inflation expectations, global central banks have become less likely to raise interest rates with some of them considering cutting rates at some point this year. This also led the Reserve Bank of New Zealand to surprise the local market by commenting that the Official Cash Rate is more likely to be cut in the near term. This was supported by slower domestic spending.

New Zealand’s economic growth remained solid but unspectacular during the quarter. Australian economic growth also remained solid, supported by strong household demand for services, non-mining business investment and government infrastructure spending. But the cooling housing market saw a softening in the construction sector.

International markets

Investors shrugged off their December 2018 quarter concerns and became bullish about global equities once more.

The MSCI All Country World Index (a measure of the performance of the largest companies globally) was up 10.8%[1]. US shares performed well, and despite poor Eurozone economic data, shares in Europe were also up. Even the UK saw a rise in its share market, despite the uncertainty around Brexit.

The main drivers for this rally were the global central banks change in stance to pause interest rate hikes, along with some positive news around the trade negotiations between the US and China. This also drove bond yields lower, which benefitted Fixed Interest markets.

Local markets

Both the New Zealand and Australian share markets bounced back over the quarter. The S&P/NZX 50 Index (a measure of the performance of New Zealand’s 50 largest listed companies) was up 11.7% and Australian shares gained 10.9%[2].

Like other markets around the world, New Zealand shares were supported by the market’s expectation that the US Federal Reserve (Fed) is now unlikely to continue raising interest rates and may even cut them. Given its sensitivity to interest rates, the New Zealand share market was one of the strongest performers, globally, over the quarter.

Australian equities were not far behind, driven by the IT sector, mining, and consumer discretionary shares (such as non-essential things like entertainment, leisure, and cars).


Global GDP data shows us that economic growth is slowing, and central banks have reduced their growth forecasts to reflect this.

The outlook for global company earnings has also been reduced which is consistent with the slowing of economic growth. However, the current low interest rate environment is supporting company valuations, with interest rates both globally and in New Zealand expected to stay low and may even be cut in some places.

Based on this scenario, global shares could perform well, while domestic and international fixed interest returns are expected to remain modest.

This publication is solely for information purposes and is only for use by BNZ investors who are New Zealand residents. None of the material in this publication constitute personalised financial advice and we recommend seeking financial advice specific to your personal situation and goals from a qualified adviser. No representation or warranty is made as to the accuracy, reliability or completeness of any statement made in this publication. Neither Bank of New Zealand (BNZ) nor any person involved in the preparation of this publication accepts any liability for any loss or damage arising out of the use of, or reliance on, all or any part of this publication. Where the information and recommendations in this publication are provided by a specific author, the information and recommendations are the personal views of that author and do not necessarily reflect the views of BNZ. BNZ Advisers’ Disclosure Statements are available on request and free of charge. Past performance is not an indication or guarantee of future performance.

1. MSCI ACWI in local currency terms
2. S&P/ASX 200 Accumulation Index in AUD terms