Major markets finished October slightly lower while NZ shares bucked the trend.

US shares1 fell around 1% (all returns are in local currency unless stated) for the month. Relative to lofty expectations, outlook statements from some Big Tech companies disappointed investors and weighed on market confidence. This was compounded by uncertainty from the upcoming presidential election and a looming US Fed rate decision. At a sector level, financials led the way on the back of strong earnings, with communications and energy also recording positive returns. All other sectors were in the red, with heath care and materials taking the brunt of the decline.

European shares2 were down around 2% for the month, on the back of concerns around potential conflict in the Middle East and moderating expectations for interest rate cuts by the European Central Bank. Only 4 of 16 European share markets eked out gains over the month. Communications was the top performing sector, up around 1%, while European real estate stocks fell almost 6%.

Closer to home, Australian shares3 fell around 1% after 5 months of consecutive gains. Financials continued their golden run, up 3% in the month and around 30% for the year. However, this was offset by losses in most other sectors with utilities and consumer staples down around 7% for the month. New Zealand shares took a different path, rising around 2% for the month4, led by strong performance by Fisher & Paykel Healthcare alongside the utilities sector.

October saw domestic and US bonds5 down slightly with prices falling. In the US investors worried about inflation proving more resilient than expected and the fiscal implications of the US presidential election. US bonds were down around 2% for the month with NZ bonds falling around half a percent.

The differing fortunes of various asset classes are illustrated in the chart below.

Returns of selected major markets for the month ending 31 October 2024

Source: Refinity Datastream, JBWere Investment Strategy Group.

Note: Returns are in local currency terms.

The outlook

In the short term, the market will be focussed on the US election results and the likelihood of certain policies becoming law. But beyond election noise, we believe there have been some recent developments that have improved the global economic outlook.

Firstly, there are signs that the US labour market is bending, but not breaking, which has increased our confidence that the US economy can achieve a so-called ‘soft-landing’. That is, bringing inflation back under control without too much economic pain. The second, is that Chinese authorities are now more forcefully responding to domestic economic woes, announcing a smorgasbord of policy measures recently aimed at supporting the economy and property market. How successful these measures prove to be is an open question, but the intention from policymakers is clear.

Consequently, we have shifted our international equities exposure closer to the benchmark allocation. We are also actively looking at opportunities to add investments that provide cyclical value to the portfolios. However, we remain somewhat cautious. Risks have reduced, but they haven’t disappeared. Equity market valuations continue to be elevated. While valuations do not infer how markets will perform in the short-term, it does serve to constrain future expected returns. Other market risks we are monitoring include geopolitics, post-election policy outcomes, earnings and economic growth disappointments, or even a flare up in inflation again. It is for these reasons we are shifting the Schemes’ international shares exposure to a neutral, but not overweight, setting.

 

We have useful online tools to help you:

If you decide to change your Fund after reviewing your risk profile or meeting with a MAS Adviser, you can make a switch via the MAS Investor Portal, or alternatively you can complete an investment strategy change request form. There is no fee for switching. Links to the relevant forms are below.     

You can see weekly updates on fund unit prices and returns on our website:  

1 As represented by the S&P 500 index.
2 As represented by the S&P Europe 350 index.
3 As measured by the S&P/ASX 200 Index
4 As represented by the S&P/NZX 50 index.
5 As represented by the S&P US Aggregate Bond index.
6 As represented by the S&P/NZX Composite IG Bond index.

This article is of a general nature and is not a substitute for professional and individually tailored advice. Medical Funds Management Limited, JBWere (NZ) Pty Ltd and Nikko Asset Management New Zealand Limited, their parent companies and associated entities do not guarantee the return of capital or the performance of investment funds. Returns indicated may bear no relation to future performance. The value of investments will fluctuate as the values of underlying assets rise or fall.

MAS is a financial advice provider. Our financial advice disclosure statement is available by visiting mas.co.nz or by calling 0800 800 627.

The Product Disclosure Statement for the MAS KiwiSaver Scheme is available: KiwiSaver – MAS 

The Product Disclosure Statement for the MAS Retirement Savings Scheme is available: Retirement Savings Scheme – MAS

The Product Disclosure Statement for the MAS Investment Funds is available: Investment Funds – MAS

Medical Funds Management Limited is the issuer and manager of the Schemes. 

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