April saw a reversal of the strong positive market sentiment we have had since November last year. You will recall I said last month that the market never rallies in a straight line, and in April, there were two clear catalysts for a market pullback. We witnessed heightened tension in the Middle East, with Iran and Israel in direct conflict, and interest rates on long-term government bonds climbed around 0.5%, as sticky inflation in the US caused traders to reprice the likelihood of interest rate cuts.
In the US, the bond market started the year with six 0.25% cuts priced in, and as I write this, there is barely one rate cut priced for 2024. So, the market digested this new information by re-adjusting stocks lower and bond yields higher. However, US first quarter 2024 tech earnings are coming in pretty solid; therefore, at this stage, I’m comfortable labelling this a pullback. Every year, the market has at least one 5% pullback. This is perfectly normal.
Scores on the doors for April 2024 performance, below.
- NZX 50 | -1.22% (vs 1 Year: -0.52%)
- ASX 200 | -2.95% (vs 1 Year: 4.86%)
- Stoxx 600* | -1.52% (vs 1 Year: 8.20%)
- S&P 500 | -4.20% (vs 1 Year: 20.78%)
- Nasdaq | -4.40% (vs 1 Year: 28.06%)
- Dow Jones | -5.00% (vs 1 Year: 10.90%)
Worst month for S&P 500 and Nasdaq since Sep 2023.
Worst month for Dow Jones since Sep 2022.
* Stoxx 600 (Europe)
I visited our Sydney office in April to spend some time with our investment team on the ground, talking to companies, analysts, local economists and brokers. I found the visit to be really rewarding and not just for the warmer weather. The Aussies are fairly optimistic, and it’s plain to see the difference between our two economies. They have a surplus, and we have a deficit. House prices are going up; ours are going down. Jobs are still plentiful, and yet our unemployment rate is still rising. Finally, confidence and sentiment are better than here in NZ. It’s for this reason that almost all of our investments down under are Australian. There are just more opportunities.
This is reflected in the performance of our Australasian small cap funds, which have had a very strong run over the past 12 months, and even in April, and our Australasian Emerging Companies Fund bucked the trend to finish with a small positive for the month. This is compared to a big sell-off in global small caps during the month, which saw the US Russell 2000 Small Companies Index falling 7%.
Next month, I will be heading north to spend some time with our UK-based investment team, and I will be taking a few weeks’ leave. During my leave I’ll be undergoing a full immersion language course to refine my French – wish me luck. Rest assured, you’re in safe hands, and you can anticipate an interesting piece I’ve written on the coming challenges and opportunities in the infrastructure sector, specifically in the Power market, in next month’s edition. You will also hear from our CEO, Ana-Marie Lockyer, whilst I’m on leave.
The value of our investment team’s physical presence on the ground in both Australia and the UK (not forgetting here in NZ, of course!) cannot be overstated. I look forward to sharing some tales from my time with the UK team on my return and, of course, to let you know how my French immersion went!
À bientôt!
2024 Tax Statements will be available by 15 May 2024 in the documents section of your online portal.
Founder & Chief
Investment Officer
Mike Taylor
Information is current as at 30 April 2024. Pie Funds Management Limited is the manager and issuer of the funds in the Pie Funds Management Scheme and Pie KiwiSaver Scheme (the Schemes). Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Schemes’ investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.
