May 5, 2023
Rose Tint Continues
April was another strong month for markets as the S&P 500 (+1.46%), ASX 200 (+1.83%), and the NZX 50 (+1.14%) all gained in the month. The S&P 500 increased on the back of strong corporate earnings by index heavy weights, such as Microsoft (+8.17%) and Meta Platforms (+15.63%). Bond yields fell in the month in reaction to weaker manufacturing indices and headline inflation expectations easing. US employment data, however, remains stubborn as labour costs increased +4.8% year-on-year (+1.2% q-o-q) which will continue to put upward pressure on prices.
US company reporting generally beat expectations as they were able to pass on inflationary pressures better than expected. So far, 66% of companies have beaten revenue forecasts, while 80% have reported earnings that surprised on the upside.
Although margins have come under pressure, aggregate earnings growth of -1.60% remains ahead of last quarter’s -3.46%. This is partly due to cost cutting been undertaken by companies, while US consumer spending increased 3.7% year-on-year. Despite the positive start to the year, outlook commentaries have been more subdued on the likelihood of slowing market conditions in the latter half of the year.
We continue to prefer investment in non-cyclical growth sectors, remain cautious on cyclically exposed sectors and mindful of valuation risks amongst defensive sectors.
Market Implied Policy Rates
We believe that the peak in monetary policy tightening is close particularly now that bank lending practices are being tightened with this expected to allow central banks to ease back on further official cash rate increases. We, however, maintain our view that policy rates will not fall off as quickly as markets are anticipating and look for service sector inflation components at least stabilising before this can occur.
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Our goal at Trustees Executors is to protect our clients’ financial security and to help you realise your financial goals. If you would like to talk about anything to do with your investments, please contact us to talk with one of our experienced financial advisers.
As always, it is important to periodically review your current investment strategy to ensure it is right for you and serves your objectives.
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Trustees Executors Limited was established in 1881 and is New Zealand’s first Trustee Company.
We provide a full range of financial and trust solutions to individuals, families and the corporate sector including estate planning, trustee and investment advisory services.
We are a Licensed Financial Markets Supervisor and a leading provider of specialist Corporate Trustee and back office fund administration services to some of New Zealand’s largest financial institutions, banks and fund managers.