Market & Portfolio Update - May 2022
Volatility in global share markets continued in May as investors focused on inflation and rising interest rates. Despite the volatility, global share markets rebounded to end the month flat, with the energy sector leading the way (up 13.5%). The energy sector includes oil producers which benefitted from oil prices rising to $123/barrel. The European Union agreed to a partial ban on Russian oil. The ban is expected to cover 90% of Europe’s Russian oil imports by the end of this year.
As expected by markets, the US Federal Reserve raised interest rates by 0.5% in May. This was the largest interest rate hike since 2000, and signals the Federal Reserve’s commitment to ‘walk-the-walk’ to try to control inflation.
The Reserve Bank of New Zealand also raised interest rates in May after it hiked the OCR by 0.5%. The OCR now sits at 2%, and the Reserve Bank’s updated forecasts show it reaching 4% by September of next year. While the rapid rise in interest rates has impacted portfolio returns over the last year (particularly conservative funds with a high allocation to bonds), it is important to note that market expectations have already adjusted so that a rise to 4% next year is already baked into prices of bond investments. There is a silver lining though - higher interest rates mean reinvestment rates are now much more attractive, supporting the future returns of bond investments.
Lifetime Book Club: The Green Mile by Stephen King
Sometimes the most powerful stories aren’t the ones that scare us. They’re the ones that move us.
Stephen King might be best known for horror, but The Green Mile is a story of humanity, compassion, and courage in the face of unthinkable circumstances. Set in a 1930s prison, it follows Paul Edgecombe, a death row officer, and John Coffey, a man with extraordinary empathy and an inexplicable gift.
The Growing Divide: Why Private Medical Claims Are Surging in New Zealand
It feels like there is another headline about our public health system being under pressure every week. Long waitlists, staff shortages, and hospitals struggling to keep up. It is no surprise that more Kiwis are turning to private healthcare to get the treatment they need and faster.