Fund watch

Market Outlook

Global asset prices rose across the board during the quarter as central bank cuts helped bond prices, while the prospect of a soft landing in the US saw equities push to record highs. As we assess the outlook for the global economy, the key themes we are following include:

Labour markets: At its September meeting, the Fed made it clear that the labour market is becoming more and more important as it sets monetary policy over the coming months and into 2025.

Historically, the labour market has been the last piece in a market-cycle framework to roll over, and recent economic data suggests that it may be starting to weaken – making it the greatest risk to our base case. Notably, we have seen a few downside surprises in nonfarm payrolls, while the unemployment rate is at 4.1%, up from 3.7% at the start of the year.

New Zealand: The New Zealand economy continues to underperform many of its global peers with retail spending tepid, growth contracting and the unemployment rate rising.

With inflation showing signs of heading back towards the RBNZ’s target, we can expect more interest rate cuts ahead. In saying this, the market is pricing in far more cuts than the RBNZ forecasted at its August meeting, which leaves bond prices susceptible to a sell-off (bond yields rising) should any economic data surprise to the topside.

Our base case – soft landing scenario: Inflation slows as services and shelter inflation eases; growth remains resilient and central banks are confident enough to ease policy to ensure that real rates remain steady rather than rise as inflation falls. As a result, global markets avoid a recession as a longer expansion is priced.

This article has been prepared by ANZ New Zealand Investments Limited (‘ANZ Investments’) 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. ANZ Investments is the investment and administration manager. ANZ Investments is not an authorised deposit taking institution (ADI) under Australian law and investments in the scheme aren't deposits in or liabilities of ANZ Bank New Zealand Limited, Australia and New Zealand Banking Group Limited, or their subsidiaries (together 'ANZ Group'). ANZ Group doesn’t stand behind or guarantee ANZ Investments. Investments in the scheme are subject to investment risk, including possible delays in repayment, and loss of income and principal invested. ANZ Group won’t be liable to you for the capital value or performance of your investment.

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.