Jarden Wealth Weekly: Finding the financial market’s silver linings for 2023

The New Zealand sharemarket has been on a wild ride this year.

OPINION

What a ride 2023 has been. At the start of this year not many of us would have predicted the events that have coloured the past 12 months.

Two wars are taking place with no immediate end in sight, and closer to home New Zealand’s election in October has resulted in a new government being formed with a three-party coalition and the deputy PM role being shared over the Government’s term. Additionally, New Zealand has experienced severe weather events that caused catastrophic damage nationwide.

It’s not unreasonable to be feeling glass half empty about the year as we also see some mortgage holders being put under stress with fixed mortgage terms coming to an end, and borrowers having to refix at higher mortgage rates. To add to the pressure, these rates are predicted to stay higher for longer.

It’s also been a strange year for markets, with a few unexpected ups and downs seen in global equity markets.

In the spirit of ending the year feeling glass half full, I find it’s always helpful to look for the silver linings, because they can always be found if we look closely enough for them.

Here are some highlights that come to mind.

The magnificence of the Magnificent 7

The stocks listed on the Nasdaq known as The Magnificent 7 are Amazon.com (AMZN), Apple (AAPL), Google parent Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA).

These seven stocks have easily outpaced the Nasdaq 100 index in 2023, with the group averaging a return of 95.62 per cent year to date (YTD) against the benchmark index average return of 46.81 per cent year to date. These figures are current at the time of writing.

This has meant twe have seen positive returns in client portfolios at times when market sentiment may have caused investors to believe it was all bad news out there.

Exceptional returns in global equities

If we look at global equities more broadly than only the Magnificent 7, overall these have delivered some great returns during the YTD, despite what has felt like a wild ride at times.

The S&P 500 is a stock market index tracking the performance of 500 of the largest companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices and is typically used as a benchmark for global equity performance.

This index is up 745.64 points to 4569.78, equating to a 19.5 per cent return for the calendar year to date. The near-all-time highs seen by the index are yet another positive to come out of what was a strange year for markets.

The upside of the Official Cash Rate

Closer to home, while the rapid increase in the Official Cash Rate (OCR) has been difficult for mortgage holders and other borrowers, local savers are benefiting from the highest cash rates we have seen in years.

For some time, savers and holders of cash investments have been in the position where their investments are not keeping pace with inflation. Now the Reserve Bank is placing inflation at 5.6 per cent, versus 12-month term deposits offered at 6.1 per cent from the big four banks.

For term deposit and bond investors, it finally feels like they may be able to win, and for those who rely on regular income payments from their fixed-interest investments, as many retirees do, this market allows them to fix their investments with attractive interest rates.

So, while it’s hard to know what’s to come when looking ahead, I hope you, too, feel heartened in finding and acknowledging the silver linings amidst what can feel like a doom-and-gloom world out there.

Sarah Ashby is a wealth management adviser at Jarden.

Jarden Securities Ltd is an NZX firm. A financial advice disclosure statement is available free of charge at https://www.jarden.co.nz/our-services/wealth-management/financial-advice-provider-disclosure-statement/.

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