Cryptocurrency markets have expanded dramatically in the thirteen years since an anonymous author published the Bitcoin white paper. While all cryptocurrencies share common features (primarily, they are distributed networks secured via cryptography) the structure of the individual assets and their intended real-world use cases have become more diverse. The two largest coins, Bitcoin and Ethereum, still account for a large majority of market capitalisation. According to CoinMarketCap.com, there are nearly 6,000 cryptocurrencies in the marketplace today with a total market capitalisation of $2.0 trillion. For comparison, the total market value of bonds covered by the Bloomberg-Barclays US Corporate High Yield Index is $1.67 trillion, while the market cap of the S&P 500 is approximately $39 trillion. Bitcoin currently accounts for 44% of the total cryptocurrency market, while Ethereum accounts for about 20%. Given its dominant position, the remainder of this article will foc...

In this Investment Insight we stay local and discuss clients’ New Zealand share market holdings. We also assess the outlook for New Zealand interest rates following the scrapping of the Reserve Bank’s all but certain interest rate hike that was to be announced on 18 August. There are areas in the economy that will be affected by the current lockdown – hospitality and tourism especially. However, given the robust state of the New Zealand economy prior to lockdown, the supportive interest rate environment, and the ramp up in vaccinations, any significant sell-off should be short-term and a buying opportunity. Below we discuss key positions in clients’ New Zealand portfolios The good Chorus is up over 13% since lockdown was announced earlier this week. It is tempting to think this is due to the uplift in data and fibre usage given we are all working from home. While positive for Chorus, that is a coincidence. This week the Commerce Commission announced the ke...

It has been many years since we have had to worry about inflation. In fact, most New Zealanders have benefited from inflation as the value of their property assets have been pushed higher through asset inflation, while at the same time the price of many consumer goods have reduced. In this way we have had the best of both worlds. New Zealand's annual inflation is now running at 3.3% year on year, which is up from 1.5% only 3 months earlier. With inflation forecast to rise further, should we now be concerned? Inflation can be a complex 'beast'. At its simplest, it can be explained as too many dollars chasing too few goods. The current housing boom is a good example of inflation in play. Low interest rates have increased our ability to borrow, effectively creating more dollars, and, when this is combined with a scarcity of supply, inflation results. However, as alluded to in the introduction, strong inflation in the value of assets is not always accompanied by general...

The Delta variant and recent economic data have markets worried about the global economic recovery. In this Investment Insight, we detail why we remain positive for the remainder of 2021 and why now is the time to rebalance your portfolio and invest in preparation for a positive six months. The last four months have seen interest rates and economically-sensitive shares decline. This has been the reason for recent underperformance. It is exactly what one would expect if the economy was at risk. But as August turns to September, we think this story will shift. Growth optimism should come back, interest rates will look to increase, and commodities recover. Our faith here is tied to several factors. While COVID cases are rising, so are vaccination rates, which reduce the intensity of hospitalisations relative to prior waves. Various experts believe that United States COVID-19 cases could peak in late August or early September, a decline which could improve growth sen...

Understanding currencies is a critical part of investment management. Any time an investment is made outside New Zealand, an investor takes on foreign currency exposure. The starting point for NZ Funds is that we manage money for New Zealand-based clients. Our clients’ operating currency is the New Zealand dollar; our default position is to hedge all currency exposure so that currency fluctuations do not impact the returns from investments overseas. This doesn’t mean our clients have no exposure to foreign exchange. Instead, it means that currency exposure is an active and intentional position – and an investment in its own right. NZ Funds will take positions when we have a view that there are fundamental reasons for a change in the value of a currency. Simply stated, a country’s currency ultimately reflects the strength and health of that economy. Over time, these changes can be significant. The New Zealand economy, for instance, is far stronger today tha...

Last week over 50% of S&P500 companies reported earnings for the June 2021 quarter. This included all five of the mega cap technology stocks which are Apple, Amazon, Google, Facebook and Microsoft (‘FAAMG’). The sheer scale of these companies means their results are widely followed by global investors, providing valuable insight into the underlying performance of the global economy and the United States equity markets. NZ Funds’ clients have exposure to Apple, Facebook and Amazon, so this week we are providing a brief overview of the earnings performance for these companies. All the results for the FAAMG companies showed incredibly strong numbers with impressive growth levels relative to prior years. On average, across the five companies, they grew their sales year-on-year by 40% and their Earnings Per Share (‘EPS’) by 92%. While investors are focused on the year-on-year growth trends shown by company results, they are also looking to see how the results compare to ...