Share markets and bond markets both fell more than 20 per cent this year, hurting even the most conservative investor.
Share markets and bond markets both fell more than 20 per cent this year, hurting even the most conservative investor.
Investors may need to practice more patience next year and look elsewhere for opportunity, with share markets unlikely to recover recent losses for at least another 12 months, according to an investment fund manager.
Speaking on the Herald’s Continuous Disclosure podcast, Fisher Funds chief investment officer Ashley Gardyne said there was a “really high probability” of recession locally, which could cause more volatility.
“We’re going to need a lot of patience next year.”
However, he was optimistic that markets were forward-looking and may not dwell on it too heavily - unlike the year that was.
“There is definitely risk that markets fall a bit further, but it wouldn’t be my base case.”
The United States benchmark index the S&P 500 index slipped into technical bear market territory this year, falling more than 20 per cent from recent highs.
Gardyne said investors that were in it for the long-haul could see equity markets push through new highs and deliver stronger returns eventually, with the recovery of losses in portfolios typically taking one year on average.
“We’re sort of back to a point in the cycle where returns from here should be what we’ve expected historically.”
Ashley Gardyne, Fisher Funds chief investment officer, said opportunity can be found in asset classes like fixed income, which was offering returns not seen for about three years.
Although, share markets may not be the best place to play in the new year, with Gardyne suggesting there would be an “average level of opportunity” in equities in the short term.
Fixed income such as bonds could be the asset class to look to instead, with rebounding returns looking more attractive than they had in the past three years.
“With the rapid rise in interest rates that we’ve seen over the last year, you can now actually get a really quite good return on fixed income.”
That would be quite the contrast to this year where bond markets fell as much as 20 per cent, alongside equities, debunking their juxtaposing trend and hurting even the most conservative investor.
In the meantime, Gardyne said Fisher Funds, which also provided Kiwisaver funds, had increased customer’s exposure to international companies, or local companies with a larger proportion of international earnings, such as Fisher & Paykel Healthcare, because the United States and European economies could fare better than New Zealand.
It had also sought new opportunities in the credit market, with a new fund that loaned money directly to private businesses, projects and iwi.
Gardyne recommended that no matter the macroeconomic environment, all investors should maintain some holdings in higher growth, riskier assets to combat inflation, because 2022 reminded him that inflation never ceased to exist.
“Inflation is never dead ... it’s always waiting. It’s a bit like Chuck Norris, he’s never dead, he waits.”
• Continuous Disclosure is available on iHeartRadio, Spotify, Apple Podcasts, or wherever you get your podcasts. New episodes come out every second Wednesday and it is brought to you with support from Fisher Funds.
