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.
How $20 a Week Could Grow Into $100,000
Retirement might not be on your teen’s radar, but a small step now could mean a $100,000 future.
This article breaks down how a $20-a-week KiwiSaver contribution — started early — can quietly snowball into life-changing savings. Perfect for parents looking to set their teens up with a powerful financial head start.
Home Loan Rates Are Dropping – But Look Who Quietly Beat ANZ to the Punch
There’s no denying it: after the Reserve Bank’s OCR cut last week, interest rates are finally starting to fall – and fast.
ANZ made headlines with a sharp round of fixed rate drops this week, bringing its 18-month special down to 4.89% and its one-year fixed rate to 4.95%. That’s the lowest ANZ’s fixed rates have been in over three years, and a welcome reprieve for buyers and refixers alike.