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Market Update - October 2023

Firstly, we would like to acknowledge the ongoing conflict in Israel and Palestine. We would like to extend our thoughts and prayers to those affected and to those in New Zealand with family affected by these tragic events.

In light of this conflict, we are watching the markets reaction. However, while most were predicting a reactionary dip, US indices have, so far, held firm.

With that said, stock markets in New Zealand and around the world have struggled the past couple of months. Conversely, bond yields have continued to climb, with the 10-year US Treasury reaching 4.8% for the first time since August 2007. The longer-dated 30-year Treasury hit 4.93%, another 16-year high.

Both equities and bonds are continuing to demonstrate the effect of “higher for longer” interest rates with recession caution remaining. Infrastructure and property add to the list of growth asset classes currently struggling through, what remains, a very challenging period.

At this years’ general election, around 2.8M Kiwis turned out to have their voice heard and give their vote as to who they would like to lead New Zealand for the next three years. National, led by Chris Luxon, produced a huge turnaround result from the 2020 General Election with Luxon looking all but certain to be NZ’s next Prime Minister once he formalises his coalition with ACT.

Te Pāti Māori (TPM) had a historic election, flipping four, Labour-held, Māori electorates, creating an overhang seat in parliament (per preliminary results on 14th Nov). Overhang seats are caused by a party winning more seats than their party vote entitles them to. TPM’s party vote gives them three seats in parliament which are filled by three of their electorate winners, with the additional electorate victor being added to parliament in an overhang seat. This increases the total seats in parliament from the traditional 120 to 121.

The exact composition of the new government, and whether Chris Luxon will need Winston Peters’ NZ First as a third coalition partner to form a majority, will be determined in the coming weeks. Conclusive factors will be the, approximately, 567K special votes still to be counted, the by-election for the Port Waikato electorate (which will be treated as another overhang seat and bring the final seat total in parliament to 122) to be held on the 25th November and the final result of razor thin electorate margins, the closest at the moment being Te Atatū where National candidate, Angee Nicholas, currently leads Labour’s Phil Twyford by 30 votes.

We are pleased the see the increase in KiwiSaver enrolments with the scheme having now reached over 3 million members. New Zealand's collective KiwiSaver assets now sit at close to $100 billion, twice the amount recorded in 2018. The Financial Markets Authority (FMA) recently projected that these savings could grow to over $2 trillion by 2070.

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