Axiome Quarterly Q3 2020

Markets continued to climb over the September quarter, in line with our view in the June update that the environment, on balance, favoured risk assets.  Better than expected macro and corporate earnings data, massive fiscal and monetary policy support, and the search for yielding assets outweighed concerns around economic risks and re-surging Covid cases in Europe and the US.

International shares rose around 5% in the quarter in NZD terms, whilst NZD hedged shares increased around 6.5%.  These results were sufficient to fully erase the Covid-19 losses earlier in the year – the very broad MSCI All Country World Index has reached new highs (Figure 1).  Within global equities, higher risk small cap stocks increased around 6% in NZD terms, while value stocks continued their under-performance, rising only around 3%.  Emerging market equities increased around 7% in NZD terms, another strong performance.