Market & Portfolio Update - September 2022
September was another volatile month for global financial markets, as central banks reiterated how far they are willing to go to get inflation back to long-term target levels. For example, in the US, this caused interest rates on bonds to rise by around 0.70%, weighing on the returns of bond investments. Share markets were also volatile, as investors came to grips with higher interest rates and slowing economic growth.
While volatility like this can be unnerving for investors, financial markets experience these kinds of events from time to time.
The New Zealand dollar tends to fall during periods when financial markets are volatile, supporting the value of unhedged overseas investments. This is exactly what has happened this time, with the falling New Zealand dollar resulting in unhedged global share investments performing 15% better over the past 12 months than if the foreign currency was hedged or locked in.
A look back at when the world feared the worst
On August 2, 1990, the world woke up to a grim headline: “Iraq Invades Kuwait; Oil Prices Soar, Markets Plunge.”
Saddam Hussein's forces had crossed into Kuwait, triggering fears of a prolonged conflict in the oil-rich Middle East.
The immediate market reaction was swift and severe.
Lifetime Book Club: The Let Them Theory
In a world where we spend so much energy trying to control outcomes, manage other people’s opinions, and keep everything on track, this book offers a different approach. One that suggests peace comes not from controlling more, but from letting go.