The global central bank interest rate easing cycle gathered pace over September, resulting in a continuation of strong returns from fixed income and global share markets. Key themes were:
- Global equity markets gained late in the month on lower interest rates. During September the US S&P 500 index hit its 42nd record high for the year and is up 36% year-over-year. European share markets also reached a record high in September.
- The Magnificent 7 (Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Meta Platforms and Tesla) as a group reversed July’s decline.
- Emerging markets were the top performing markets, led higher by the Chinese share market (+21%) following the release of measures to stimulate the economy. This comes after a prolonged period of underperformance for the CSI China 300 Index.
- New Zealand’s share market was flat as it digested the corporate earnings announcements.
- Australian equities benefitted from higher commodity prices on the back of the Chinese economic stimulus package.
- Global bond yields drifted lower in September on benign inflation outcomes and expectations for ongoing interest rate reductions by central banks around the world.
- The relative attractiveness of domestic bonds has declined given the dramatic decline in longer-term interest rates over the last three months.
- Global bonds continue to offer stability of income and the potential for capital gains from further reductions in interest rates as inflation continues to decline and central banks progress interest rate cuts.
The current environment remains constructive for both fixed income and equity markets. Please contact John at Kapiti Financial Advice to discuss how a well-diversified portfolio can help you achieve your financial goals.
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