Trilogy Webinar with Bevan Graham – Salt Funds Management

Bevan Graham, Economist for Salt Funds Management, has been a regular contributor to Trilogy’s webinars over the past few years and we are always grateful for his opinions and insights on what’s happening in the world.

Bevan sat down with Chiti to discuss his views on the outlook for interest rates in the US and NZ, the potential impact of this years’ geopolitical outcomes and what other risks the market could react to in the short-medium term.

Trilogy would like to thank Bevan for his time and invite our clients to view this webinar on our website for your information and entertainment.

Investment Update - January 2024

Market Update

2024 has been off to a great start for investors with the S&P500 and Dow Jones reaching new all-time highs and exciting investors at the notion that the next bull market has likely arrived.

The US economy is growing at a rapid clip, expanding 3.3% in the fourth quarter. It was much higher than the expectation of 2% from economists. The US economy was expected by many to go into recession last year, but this didn’t happen - in fact, the economy got 2.5% bigger.

The data underscores the continued resiliency of the US economy, despite interest rate hikes from the Federal Reserve. US inflation also declined with the Personal Consumption Expenditures Price Index at 2.7% on an annualised basis, down from 5.9% a year prior.

Core inflation, which excludes food and energy, increased by 3.2%, down from 5.1%. Inflation from the service sector, which has been running hot, is back at 2.6%, the lowest since 2020.

 The NZX50 has also seen significant gains over the last couple of months but is significantly lagging the US on its return to peak levels.

However, this is a positive sign that rate hikes over the past few years have done their part to help get inflation under control, with slow growth an inevitability. Earlier this week NZ’s annual inflation reading came in at 4.7%. This marks a significant fall from its prior 5.6% result in September last year and a long way along the road back to the 1-3% RBNZ target range, from it’s 7.3% peak in June 2022.

These positive inflation results support economic forecasts that 2024 will be a year of interest cuts and monetary easing. However, the Reserve Bank will be wary of acting too quickly and creating an inflationary rebound.

But with banks starting to lower their interest rates, following the decline in swap rates seen in Q4 of 2023, there are plenty of signals that there is positivity ahead in 2024… at long last.

Staff Update

With the start of a new year, Trilogy is pleased to announce the return of a familiar face. Elodie has now returned from maternity leave and will be working Monday to Wednesday going forward as she balances a return to work with caring for her little boy, Mataeya.

Trilogy is thrilled to have Elodie back on board, as we are sure our clients who are familiar with Elodie will be, as well. Welcome back Elodie!

Seasons Greeting from Trilogy Financial Solutions

Market Update

November has been one of the strongest months for markets in the past couple of years.

The strong markets coincide with a moderation of bond yields on the view that central bank rate hikes are finished. After peaking at 5% in October, the US10Yr is now back at 4.11%, a level last seen in August this year. The bond market easing have a direct correlation with equity markets recovering the declines seen in August to October this year. The S&P500 has rallied nearly 10% this month and is back above the levels seen at the beginning of September.

Meanwhile, the world’s largest economy has held together well, although central bank officials will no doubt be keeping a close eye to ensure the positive global performance does not restoke inflation. The US Federal Reserve official Barkin said that policymakers could keep rate increases on the table if inflation doesn’t continue to slow.

The US economy expanded more than previously reported in the third quarter, growing at an annualised pace of 5.20%, up from its initial estimate of 4.90%. Non-residential fixed investment and state and local government spending were stronger than expected. Consumer spending growth eased to 3.60% from the 4% advance estimate – although as recent stats show, consumers have possibly been keeping their powder dry until the start of the holiday shopping season.

There was also further good news on inflation. Prices increased less than expected during the quarter. A “core” measure of inflation was revised down to a year-on-year increase of 2.30% from 2.40%.

Corporate profits jumped 4.30% during the period, up sharply from the 0.80% gain in the second quarter. As the recent earnings showed, much of Corporate America is in good shape.

The employment market in New Zealand, much like the US, showed signs of slowing during the month with the unemployment rate rising to 3.90% for the September quarter, up from 3.60% previously. Wages rose 4.30% on an annual basis, with pay in the public sector outpacing the private sector, largely reflecting pay settlements in the healthcare and education sectors. We should point out that these unemployment rates are historically low e.g. in the unemployment rate in 1993 in NZ was 9.80%.

The most recent Reserve Bank of New Zealand (RBNZ) review left the Official Cash Rate (OCR) unchanged at 5.50% on 29 November.

Staff Updates

Chiti Wijesinha will be traveling with his family to Sri Lanka for Christmas. In addition to the festive season, he is looking forward to spending time with his Mum for her 90th birthday.

Steve Morris will be heading to his family bach for the holidays after a busy 2023 across Trilogy and sister risk management business, Morris & Co.

Dennis Green and Diane had an extensive holiday overseas in August and September which included the Edinburgh Tattoo and a cruise around the British Isles followed by a River Cruise from Budapest to Amsterdam. On his return trip with Emirates (on which he enjoyed the live sport they were showing on their TVs) he had a few days stopover at Dubai where he did a Desert Safari and Camel Riding. After a big mid-year trip, he’s looking forward to a Christmas break spent at home.

Mark Green and family will have a long holiday at the Coromandel and is looking forward to fishing, diving and BBQ.

Adrian Dale will be enjoying both playing and coaching cricket over the holidays, and spending some much-loved family time. He’ll be representing Auckland Over 50s in a 5-day tournament in Dunedin as well as coaching a very talented group of Cornwall U17 players in a local Auckland competition.

Elodie George will be returning to Trilogy in January 2023 having recently been on maternity leave. Elodie is looking forward to spending the holidays with her little boy, Mataeya.

 Cam Posner will be heading to Europe for the holidays with his partner, Kayley. He’s looking forward to ticking a Top Deck Tour of Europe off his bucket list and spending time with his UK family.

Andrew Webster will be spending Christmas in Auckland with family, and then heading to his family bach in Whitianga for the New Year and remainder of his holiday.

Niel Perera and his wife Sue are looking forward to celebrating a joyous Christmas season with parents who are on holiday from Sri Lanka.

Office Shutdown for 2023

Trilogy’s last day of business for the year will be 21st December and we will be back on 8th January 2024.

If you have any urgent queries during this period, please email info@trilogyfs.co.nz and someone will get back to you as soon as possible.

Trilogy would like to take this opportunity to thank our clients for continuing to support us, and put their trust in us, throughout 2023. We look forward to, hopefully, more market positivity in 2024 and watching our client’s patience and resilience pay off.

We would also like to wish you a Merry Festive Season and look forward to continuing to work with you, refreshed and recharged, in 2024.