Month in a Minute: August '21 - Milford Asset

Month in a Minute: August ’21

Mark Riggall

Portfolio Manager

Mark is the Portfolio Manager for the Balanced Funds and KiwiSaver Moderate Fund (responsible for asset allocation) in addition to responsibility for managing the Central Dealing Desk. Prior to joining Milford in November 2014, Mark spent 11 years with Morgan Stanley in London and Hong Kong as an equity derivatives trader. In Hong Kong he had responsibility for the Asia ex-Japan index derivatives business, running multiple regional derivative portfolios. Prior to that in London he ran a global equity derivatives portfolio in addition to a UK equity derivatives portfolio. Mark has a Masters of Engineering degree from the University of Bath, UK.

Portfolio Manager Mark Riggall discusses August’s key highlights in 60 seconds.

Glass half full

Share markets across the world had a solid August. Whilst bonds posted modest losses in the month, fund performance was broadly strong.

The NZX 50 return of 5% this month seems remarkable in the face of our latest Covid outbreak and subsequent level 4 lockdown. However, the NZ market has been a notable underperformer this year. Recently, this was likely due to investor fears over Reserve Bank rate hikes. The Covid outbreak put these on hold, sending investors back into NZ shares.

NZ companies also posted strong company earnings in August, highlighting the quality companies we have on the local market. Profit margins have remained intact despite notable cost increases. Strong performers for Milford funds were Mainfreight, EBOS and Summerset – all delivering gains of around 15-17% on the back of solid results. Although the outcome of the current virus outbreak is unknowable, it is unlikely that we will see a material impact on the NZ share market.

Shares are benefitting from the lack of alternative investments. With yields on bonds continuing to languish at depressed levels, global investors are pouring funds into share markets. This was evident in the strong performance of Australian dividend paying stocks with the Australian property sector up over 6%. Fund performance was also boosted by solid gains in the quality growth stocks such as Google, Microsoft and Amazon, all up around 4-7%. Banks also had a good month, particularly in the UK as that economy booms post their reopening.

As we look ahead, the path is less certain. Global economic growth has peaked, the Chinese economy is suffering from a self-induced slowing, inflation pressures remain high and bottlenecks in supply chains are constraining activity. Most concerning, global consumer confidence appears to be waning, perhaps due to fears over the Delta variant or frustration over rapidly rising purchasing prices of almost everything.

But stand back a little, and the medium-term outlook remains very rosy. Household savings are high, governments and central banks continue to stoke the economy, companies are well placed to increase profits. The global Delta surge is subsiding, and consumer confidence will likely return. We think the recovery still has legs.

Disclaimer: The material contained herein is based on information believed to be accurate and reliable although no guarantee can be given that this is the case. This is intended to provide general information only. It does not take into account your investment needs or personal circumstances. It is not intended to be viewed as investment or financial advice. Before making any financial decisions, you may wish to seek independent financial advice.