Selected market indicators for period ended 28 February 2017

Provided by Mercer. 
Global Equity markets rose in February, continuing their upward trend of the last few months.

Global Bond markets bounced back over the month, delivering their first solid return since the US Presidential Election. Trump fuelled sentiment continues to support a booming US share market, with the S&P 500, Dow Jones and NASDAQ indexes all rising impressively throughout February. Eurozone political uncertainty has unnerved European bond markets, with opinion poll movements influencing yields up and down as elections loom across the region.

The MSCI World Index rose +3.1% (in local currency) during February. Unhedged investors received a return of +4.2%, benefitting from a weakening NZ Dollar, which depreciated -1.4% against the US dollar. Locally, NZ Shares and Government Bonds had positive returns over the month, up +1.7% and +0.8% respectively. Global Bonds also performed well, with both Global Government Bonds and Global Aggregate Bonds rising +1.0%. Global Listed Property and Global Listed Infrastructure performed strongly, returning +3.4% and +4.0% respectively.

An estimate of a Balanced Fund gross index return based on selected market indicators for February is +1.8%.

Significant recent items include:
  • The RBNZ Governor, Graeme Wheeler, announced early February that he will step down from his role at the end of his term in September. Deputy Governor, Grant Spencer, will take over as caretaker until a permanent successor is appointed in 2018 (post the general election).
  • The number of Americans filing for the unemployment benefit fell to a near 44 year low at the end of February. Initial claims dropped by 19,000 applications to a seasonally adjusted 223,000, the lowest level since March 1973, and below expectations.
  • National Front leader, Marine Le Pen, leads the opinion polls for the upcoming French Presidential election, although her lead is not expected to hold in the second round of voting on 7 May. If Le Pen wins the election, France leaving the EU is a real possibility.
  • The Dow Jones Industrial Average closed above 21,000 for the first time ever just after month end, matching the fastest ever 1,000 point increase since May 1999, only taking 24 days.
Trans-Tasman Equities
Although it lagged other developed markets, the New Zealand share market still provided a decent return for the month (+1.7%), building on last month’s positive start to the year. Across the Tasman, the ASX200 also rose (+2.3%) (AUD). Both markets fell towards the end of the month, possibly reflecting caution ahead of Trump’s highly anticipated speech to a joint session of Congress.

Global Equities
Developed markets around the globe delivered strong returns in February. The MSCI World Index rose +3.1% in local currency terms, supported by the rapidly rising US share market. Unhedged investors received a higher return due to a weakening NZD against most major currencies (+4.2%). Emerging Markets were positive over the month, albeit not as strongly, returning +1.7% in local currency

Property and Infrastructure
The Global Listed Property and Global Listed Infrastructure sectors benefitted from a decline in global yields over the month, resulting in returns for both sectors ahead of the broader global equities market. Listed Property finished up +3.4% and Listed Infrastructure returned +4.0%. Listed Infrastructure continues to be buoyed by the promise of US Government spending.

NZ Bonds and Cash
NZ Government and Corporate Bonds both delivered a positive return of +0.8%, steadily recovering from the large recent decline in prices. The RBNZ announced early Feb that the OCR will remain unchanged in an effort to keep monetary policy accommodative of above-trend GDP growth and increase inflation towards the midpoint of the target range.

Global Bonds
Global Aggregate Bonds and Global Sovereign Bonds both returned +1.0% for the month. The majority of Global Bond yields steadily declined throughout February, with European bond yields the most volatile as political uncertainty continues to influence the market. Corporate bonds performed better than Government bonds, returning +1.3%.

The NZ dollar declined against most major currencies in February. The largest decline was against the AUD, down -2.6%, finishing the month at 0.9407 AUD.  The only major currency the NZ dollar appreciated against was the Euro, gaining +0.3% and finishing the month at 0.6806 EUR. On a trade-weighted basis, the NZ dollar fell -1.8%.

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