Investment Update with Salt Funds Management - February 2022

While 2022 continues to prove volatile due to high inflation, rising interest rates, and geopolitical tensions between global superpowers, it is important to call on the knowledge of those experienced individuals, who have insights as to the potential causes and effects of these issues. This affords us perspective as to what is currently happening, how we can try to weather the storm, and what the outlook for investing may be going forward.

Trilogy is pleased to welcome back Bevan Graham (Economist) and Greg Fleming (Head of Diversified Funds) of Salt Funds Management to discuss the current global situation and how this is impacting markets.

During their talk with Trilogy’s Investment Specialist, Chiti, Bevan and Greg cover how the current pressures on global economies are creating the volatility we are seeing now, and how this has affected their outlook for investing since we spoke to them in August last year.

Disclaimer: This video is for information purposes only and should not be treated as financial advice. To the extent permitted by law, Salt Funds Management Limited, Salt Investment Funds Limited, and Trilogy Financial Solutions NZ Limited, do not accept any responsibility or liability arising from your use of this information.

Market Update: January 2022

Happy New Year and we hope you had a relaxing break!!

2022 is off to a tumultuous start with last year’s rally fading since the new year. So far this year, global equity markets have collectively retreated. Share markets are not yet in bear market territory (minimum 20% reduction from peak) but a correction (10% retreat from peak) has been evident within segments of the share market.

One of the catalysts for falling equity markets has been the emergence of inflation. After a period of low interest rates, which have seen equity markets and house prices appreciate, governments around the world are seeing inflation appear throughout the economy, forcing them to look at raising interest rates. New Zealand started raising rates last year and this is one of the key reasons NZ shares were an underperformer in 2021.

Now, the US is going through the same process with the Federal Reserve recognising that inflation is not transitory (temporary) and has moved to end easy monetary policy (increasing the supply of money, often by lowering interest rates) and could increase interest rates four times this year. These inflationary outcomes stem from various sources:

· Rising energy price

· Goods shortages

· Shipping costs

· Rising wages

· Climate impact

· Trade barriers

· End of pandemic support

The current weakness in share markets needs to be kept in context. A fall in the S&P500 index of 5% typically occurs twice a year. The current falls are consistent with past movements in interest rates of the same magnitude. Many commentors and economists expect the interest rates in New Zealand to rise over the next few months. This week, the Federal Reserve mentioned that it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged will be a sustained battle to tame inflation. https://www.reuters.com/business/finance/inflation-fighting-fed-likely-flag-march-interest-rate-hike-2022-01-26/

The emergence of Omicron has also contributed to the recent market nervousness.

There is no certainty that further falls will not occur but there has already been a substantial down rating in non-profitable companies. The underlying economy is operating close to capacity (and hence inflation) and the earnings growth outlook is positive.

For markets, the longer-term outlook continues to be more important than short-term fluctuations, with growth expected to rebound later this year. Although further disruption from geo-political events, such as the current Russian-Ukrainian threat, cannot be discounted, companies that “make stuff”, provided they can adjust prices for inflation, can continue to do well. Inflation, particularly in early phases, is not always bad for stocks. During these phases, it is not unusual for share markets to continue to generate positive returns. Real assets, which includes shares, are the best hedge against inflation on a continuing basis.

It’s always difficult to ‘time the market’ so ‘time in the market’ continues to be the best strategy. We often find the biggest detriment to an investment’s return is not the actual investment, it is the investor’s decisions with that investment, especially when volatile markets make them, understandably, anxious. Our job is to keep clients from selling low after buying high which means sticking to the plan during turbulent times. The chart below shows the impact of missing market days.

In our view, the key things for investors to bear in mind are as follows:

· Corrections are healthy and normal.

o In the absence of a recession, share market falls are, generally, limited

o To avoid getting thrown off a long-term investment strategy it's best to turn down the noise.

· During volatile times, it’s not prudent to cash in or convert growth investments to conservative investments as you will be turning paper losses into actual losses.

· It’s impossible to perfectly time the bottom of a market fall, but one way to take advantage of it is to average in over time (put money into the market, at regular intervals, throughout the fall).

· The best way to react in a downturn is to stick to an appropriate medium to long-term investment strategy which aligns with your goals and priorities.

Please contact us if you have any questions.

Kind regards,

The Trilogy Financial Solutions Team

Investment Update with Magellan Asset Management - February 2022

After another year of strong performance from global equities in 2021, high inflation and rising interest rates have seen a period of volatility in the global markets since the new year. Many economists had been predicting a correction in the markets, which came to fruition throughout January as most global equity markets saw a decline.

During periods of uncertainty, as we are experiencing now, we must look further than common stocks to determine if a better outcome may be achievable by introducing other asset classes into investors’ portfolios. Trilogy is pleased to present David Costello of Magellan Financial Group to share his thoughts on one such asset: Global Listed Infrastructure.

David holds a Bachelor of Laws (Honours) and Bachelor of Commerce (Honours) from University of Queensland and is a Chartered Financial Analyst. Prior to joining Magellan in 2015, David worked with National Australia Bank, S F G Consulting, and led Ernst & Young’s financial-modelling practice in Brisbane.

In his conversation with Chiti, David discusses the main factors contributing to current volatility, the outlook for 2022 and how infrastructure may be used to manage current market influences and their impact on investors.

Disclaimer

This video is for information purposes only and should not be treated as financial advice. To the extent permitted by law, Magellan Asset Management Limited, and Trilogy Financial Solutions NZ Limited, do not accept any responsibility or liability arising from your use of this information.