Axiome December update 2018

The very strong returns markets have enjoyed since around 2011 came to crashing halt in the December quarter.  Large declines occurred in equity markets in the month of October and then again in December as markets grappled with interest rates increases (in the US), the Brexit deadlock, ongoing trade tensions between the US and China, a partial US government shutdown, and some weaker than expected corporate earnings.

International developed market equities fell by around 14.5% over the quarter (in NZD terms), implying a -3.2% return for the calendar 2018 year. In contrast, emerging markets, which are also normally more sensitive to a major downturn, fell by ‘only’ 8.7% in the quarter.  This partly reflects that emerging markets, particularly the Chinese equity market, had borne the brunt of the trade war fears earlier.  But it may also reflect a view by many equity analysts than emerging markets now offer particularly good-value for investors.

Trans-Tasman equity markets did not escape the decline.  Australian equities fell around 11.5%, and NZ equities were relatively robust to the global sell off, falling by around 6%. NZ equities returning around 5% for the year is a strong result compared to most other equity markets.   Global property was also relatively resilient, declining by 5.6% in the quarter and 3.7% over the year.