Investment returns (before tax and fees) for the quarter ending 30 September 2022 are:

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* rounded to one decimal place.


Share markets were generally flat over the quarter. The fall in international share markets was offset by a fall in the New Zealand dollar. The New Zealand dollar fell as investors became concerned about the local growth outlook and that interest rates on offer may be better later overseas.

The downward movement in the New Zealand dollar could be considered a double edged sword. Exporters may be happier but imports may become dearer. Bond prices continued to fall (i.e. interest rates continued on their upward march this year) as major central banks around the world remained concerned with regards to the near-term inflationary outlook and conveyed their views as to the need for potentially higher short term interest rates. They hope to offset the rising cost of living that people are experiencing, by reducing demand for goods and services but without causing a recession or a large slowdown in the economy. The relentless rise in global interest rates continues to put downward pressure on share markets.

The recent return of large movements (up and down) in the share markets demonstrate their hyper-sensitivity to economic news and expectations. Political events added to the volatility (e.g. the proposed tax cuts and spending plans in the UK, subsequent U-turns in policy and the resignation of the UK Prime Minister).

The global economy is in unchartered territory with markets more focused on inflation and interest rates and less on company fundamentals. Outcomes in this respect are very hard to predict.

The International Monetary Fund (IMF) signalled a downgrade, for the fourth consecutive quarter, to its updated global growth forecasts in early October. The head of the IMF said that a third of the world’s economy would suffer a recession next year and many others would feel like they were in recession, against backdrop of shrinking real incomes and rising prices.

A lot of pessimism has been priced into markets this year, and there has been significant conjecture about where interest rates, inflation and the broader economy are heading.

Optimists point to leading indicators of inflation falling rapidly, setting up 2023 for a year of big declines in measured CPI (Consumer Price Index) inflation, while pessimists raise the idea that inflation will remain sticky, like it did in the 1970s, and it will take much higher interest rates to bring inflation under control.

Given the economic background which suggests a challenging time ahead for company earnings, uncertainty around company outlooks and consumer spending we remain cautiously invested, diversified and continue to hold higher than normal amounts in cash.