This might seem amiss, but there are a few genuine reasons our market should hold up better than others during periods of weakness.
For a start, our economic growth prospects are relatively intact, despite the collapse in dairy prices.
Europe is facing a 35 per cent chance of slipping back into recession, according to the International Monetary Fund, and while the US is performing well, the US dollar is rising and interest rates are likely to do the same next year.
These two latter issues have created some investor caution to offset the otherwise positive economic tone.
New Zealand is still in a relative sweet spot. Our growth is decent, albeit slowing, and we've seen the last of any interest rate hikes for some time. Our currency has fallen, so last year's headwind is about to become a tailwind for many listed companies.
Our market offers an average dividend yield of more than 6 per cent, well above what's on offer elsewhere. For investors highly focused on income, this provides a floor that sees buyers step in as share prices fall and these yields look better still. Finally, the make-up of our market is a big part of the reason we are less volatile.
Globally, energy, mining and financial sectors have felt the brunt of the sell-off. In the US, despite the "market" falling 5 per cent, the consumer staples and utilities sectors have actually managed to post rises over the past month.
In Australia, the dominant financial, energy and resources sectors (which make up more than 60 per cent of the index) have been some of the hardest hit, which has seen the headline ASX200 fall heavily. Other sectors, such as healthcare and utilities, have fared much better but these are under-represented in the headline index (only 7 per cent in total).
Of the 50 companies in the NZX50, 24 fall into what I would describe as defensive sectors, like infrastructure, healthcare, utilities and property.
These companies represent 58 per cent of the NZX50 by weighting, and they are inherently less volatile or economically sensitive than average.
This means they often underperform when markets are rocketing ahead, but come into their own during rough patches.
Conversely, I can count the energy, mining and financial stocks on one hand. A number of the other industrial businesses are exporters, so they are benefiting from currency weakness to offset challenges in end markets.
Mark Lister is head of private wealth research at Craigs Investment Partners. A disclosure statement is available on request. This article is general in nature and does not constitute personal investment advice.
