Financial markets have been in turmoil since the US introduced high trade tariffs for most of its trading partners. Photo / Getty Images
Sharesies investors played safe over the March quarter, opting for exchange traded funds (ETFs) and managed funds over individual companies, the platform said.
The “Sharesies Index” - which gauges how retail investors in Australia and New Zealand may be feeling about investing and their wealth - showed that investors held steady in the quarter as they began to adapt to international uncertainty.
The index indicates where the mood is trending among the 800,000 investors signed up to the platform, which attracts assets worth $8billion -$9b.
Key inputs to the Sharesies Index include the ratios of buying and selling of shares, deposits and withdrawals to “Save and Invest” accounts, investing in companies versus funds, average amount bought per customer and the volatility of the ‘Sharesies Bundle’ (the 50 most owned investments on Sharesies).
Following the “Confident” score of 55 for the previous three months from October-December, investor sentiment became more subdued, dialling back to 39 into the “Cautious” range towards the end of March as worries about US tariffs mounted.
“Now, we’re seeing those impacts and Sharesies’ investors are bracing for the bumpy ride, while still staying adaptable,” Sharesies said.
“We’re still seeing net buying, but there was some increase in selling over the weekend.”
However, it was from a small subset of Sharesies’ customer base who were typically active, so this wasn’t outside their expected activity, it said.
This week, there had been selling activity with a preference for different asset classes and markets, namely gold and the Smart Europe ETF.
“Overall, there is strong depositing behaviour and lower than usual withdrawals.
“As with during the Index period, investors are seeing opportunities or changing their invest strategy to ETFs or managed funds.”
In early March, the percentage invested in companies (PIC) versus managed funds and ETFs fell to an all-time low of 52%, marking the lowest weekly figure on record.
Throughout March, the PIC remained consistently low, below 65%.
“This change suggests a strong preference to diversify and decrease risk with investors favouring exchange traded funds (ETFs) and managed funds over individual stocks.”
Sharesies said a higher PIC may indicate higher confidence, with investors prepared to take a risk on their company picks, whereas, in periods of lower confidence, investors tend to seek more diversification using funds.
Co-founder and co-chief executive Leighton Roberts said that since March 31, there had been a lot more buying activity “which is a bit surprising”.
“Maybe there were a few more people waiting on the sidelines for some sort of decent adjustment in the market,” he said.
The March quarter was the second highest trading quarter on record for Sharesies (the December 2024 quarter was the highest).
Roberts said the December quarter reflected much of the hype around the US presidential election and lower interest rates.
“Towards the end of last year, it was very much correlated to interest rates decreasing.
“When Donald Trump was originally elected, the forward thinking was that it was going to be very good for markets.
“And then that sort of flowed through to January - which is always quite strong - it tends to be when people are goal setting and things like that.
“In the last three or four days, actual investment back into the market has really accelerated again.
“It will be interesting to see how long that lasts for because, we’re in a peaking news cycle right now.”
Roberts said that since Sharesies’ inception in 2016, managed funds have been the most popular choice among investors.
Sharesies data showed the average investor has three funds and four companies and most of the portfolios tended to be in funds.
“Even for KiwiSaver, for example, 90% of portfolios are held in the funds.”
Roberts said Sharesies’ PIC statistic was a good measure of people’s cautiousness.
“It means that people have less confidence in trying to pick those winners.”
Among the individual companies favoured by Sharesies investors, Air New Zealand ranked as No 1 - with 100,000 people invested in the airline.
Many of them became involved in Air NZ after the huge $1.2 billion capital raise, which was held in 2022 to fix the company’s balance sheet after Covid-19.
Second is the US artificial intelligence giant Nvidia, followed by Elon Musk’s Tesla, Apple and New Zealand’s Rocket Lab.
“The big thing that we’re saying is to stick to the plan and this appears to be what most people are doing,” Roberts said.
“Investing is a long game and this is, in all likelihood, a shorter term blip.”
Roberts said the largest investing cohort on the platform were those who followed dollar cost averaging theory, where people invest a fixed amount of money at regular intervals, regardless of the market price, the aim being to reduce their average cost of entry over time.
“It’s very important that they continue to dollar-cost-average when the prices are down like this.
“They were buying these funds and companies 10 days ago at a higher price, so they should buy them today at lower prices and continue with their strategy, and most people are, so we’re just really trying to reinforce that confidence for people.”
Markets rebounded yesterday on the apparent about-face in US trade policy, but Morningstar’s US-based economist Preston Caldwell sounded a note of caution.
“The market is reacting too optimistically, unless Trump announces further tariff reductions and credibly refrains from future retaliatory increases,” Caldwell said in a commentary.
“The average tariff rate currently stands at around 20%, with the tariff rate on China at around 125%, constituting a de facto embargo.
“By comparison, at the end of 2024, the average effective tariff rate was 2.4%,” he says.
The tariff relief that Trump announced on Wednesday came somewhat quicker than expected, he said.
However, we already anticipated that the average US tariff rate would decline from 25% at the time of the April 2 announcement to 18% by year-end 2025.
“We’ll make some tweaks to our economic forecast, but we still expect a major rise in inflation, slowing economic growth, and a roughly 40% risk of a recession this year,” Caldwell said.
Like New Zealand, Australia had the lowest US tariff rate of 10% imposed on goods exported to the US.
Relative to other countries, that puts Australia in a “less bad” position, Robbie Urquhart, Fisher Funds senior portfolio manager - Australian Equities - says.
But that has not spared the Australian share market.
There had been large variations in share price performance across sectors.
The implicit economic growth shock from tariffs has put the skids under global energy (including oil) prices, he said.
Unsurprisingly, the energy companies including Woodside, Beach Energy and Santos have each fallen back.
Companies with defensive earnings characteristics, including bellwether healthcare companies such as Resmed, CSL and Cochlear, have fared better.
“It helps if companies are selling products needed in good and bad economic conditions,” Urquhart said.
“It will take time for the tariff details (including product exemptions) to be worked out.
“However as a theme - companies carrying a lot of debt on their balance sheet, such as Mineral Resources have suffered in this environment - a reminder for corporates to ensure they have sufficient balance sheet ballast to survive an economic winter should it arrive.”
“Overall, high-quality businesses with good economic moats around them selling goods or services that are needed (and are not discretionary) by customers have fared better in this volatile month,” he said.
“We think these sorts of companies will likely stand the test of time even in a very uncertain global economic (and trade) environment.”
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
New Zealand shares suffered a poor first quarter, driven by sickly corporate earnings.