Fund watch

What's going on in financial markets?

Financial markets have had a challenging first half of the year, and you may have noticed that the value of your investments has fallen. Investors are worried about inflation and higher interest rates. Geopolitics has played a part too, with the Russia-Ukraine conflict adding to the uncertainty.

Financial markets don’t like uncertainty, and there are concerns about what this may mean for the global growth outlook – which has a big influence on how financial markets perform. Many are worried that growth will slow and could tip the world’s economies into recession. This has resulted in some big ups and downs, with the general trend being that financial markets have moved lower.

How have markets reacted

Global share markets are considerably lower than where they started the year. The prospect of slowing growth and falling demand suggests that companies may not make profits in the same way as they have done over the last few years.

Meanwhile, bond (or fixed interest) investments, which in the past have provided protection for investor portfolios when share markets are falling, have also been weak. Bond investments tend to underperform when interest rates are heading up. Given how quickly interest rates have had to rise, and with further rate hikes expected, the size and pace of the sell-off in bond markets has been significant.

Time to take a step back and get some perspective on recent moves

We understand that no one likes seeing the value of their investments going backwards, but it has been a tough six months for investors, with both bond and equity markets falling at the same time. As hard as it is, market falls are part and parcel of investing, and even our more conservative funds – such as the SIL New Zealand Fixed Interest Fund – may see negative returns from time to time.

However, we would reiterate the importance of taking a longer-term perspective on investing, and remind you of just how well investment markets have performed in recent times. Fund returns were strong over 2021, and indeed have been for the last ten years.

If you do not need your money straight away, you should have the benefit of time to enjoy a recovery in markets; and history tells us that most market falls are followed by a recovery.

Our consistent investment approach

The one thing we can say to you is that we maintain our own approach to investing. We focus on high-quality companies, which exhibit strong balance sheets and are run by people who exhibit strong leadership qualities. We are monitoring the markets as closely as we always do, and we seek to make the best decisions on behalf of you, our investors.

What has changed though, is uncertainty. And while we can’t control it, we can certainly prepare for it, which is why, ANZ Investments’ funds are carefully diversified to help manage uncertainty. For example, our SIL Balanced Plus Fund holds a combination of cash, bonds and shares plus other investments such as property and infrastructure. This can provide a cushioning effect for the fund should a particular asset class fall in value. Even our single-sector funds – which invest in only one asset class, such as New Zealand shares or international shares – are well diversified across different sectors, types of securities and, in some cases, geographic regions, meaning they’re less exposed to falls in particular types of investments or companies.

Want help dealing with market volatility?

First and foremost, we would urge investors to focus on their own situation, including their tolerance for risk and their financial goals, and to avoid making knee-jerk or short-term decisions.

If you’re concerned about your investments, you can also visit our online resources. There you’ll find tips on how to deal with the ups and downs in markets, and to find out some of the ways ANZ Investments is looking out for your investments.

And last but not least, please don’t hesitate to contact your financial adviser.

This article has been prepared by ANZ New Zealand Investments Limited for information purposes only and it should not be treated as financial advice.

Superannuation Investments Limited is the issuer and manager of the SIL Mutual Scheme. Investments in the scheme are not deposits in ANZ Bank New Zealand Limited, Australia and New Zealand Banking Group Limited or their subsidiaries (together ANZ Group), nor are they liabilities of ANZ Group. ANZ Group does not stand behind or guarantee the obligations of ANZ New Zealand Investments Limited or Superannuation Investments Limited. Investments are subject to investment risk, including possible delays in repayment, and loss of income and principal invested. ANZ Group will not be liable to you for the capital value or performance of your investment. Your investment in the scheme is not guaranteed by ANZ Group, Superannuation Investments Limited, any of their directors or any other person.

Past performance does not indicate future performance, and performance can be negative as well as positive. This material is for information purposes only. We recommend seeking financial advice about your situation and goals before getting a financial product.

Investment and administration manager: ANZ New Zealand Investments Limited