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.
Do You Have a Toxic Relationship with the Phrase “Treat Yourself”?
The phrase “treat yourself” has become a modern mantra. It’s a great way to celebrate a milestone, reward a job well done, or break free from your everyday routine. However, when it comes to our bank accounts, treating yourself can sometimes cause more harm than good.
One small indulgence leads to another, and before you know it, the lines between self-care and overspending blur. You might walk away from the register with a bag in hand but a sinking feeling in your stomach. Sound familiar?
Scroogenomics at Christmas: Finding Joy Beyond ‘The Extravagance’
Gazing through the dimly lit windows of his modest office, Ebenezer Scrooge pondered the modern-day Christmas, “Ah, Christmas – each December, a tide of frivolity sweeps the world, with consumers collectively parting with an estimated $1 trillion globally on holiday spending.”
Reflecting on this, the Scroogenomist wonders, “What if Christmas were not marked by gaudy extravagance, but by acts of kindness? A season where gifts are not measured by their price tags, but by the care and thoughtfulness behind them. A handmade scarf, a heartfelt letter, or simply the gift of time – all these carry more value than gold. How uplifting it would be if people prioritized what truly matters: love, compassion, and the joy of giving.”