Global equity markets and global bond markets performed strongly for a fifth straight month in September. Over the last 12 months, only October 2023 and April 2024 saw ‘risk-off’ months where equity markets pulled back. After a difficult start to the year, global bonds (hedged to NZD) have returned nearly 5% year-to-date. Central banks easing monetary policy began in the first half of the year, and this trend continued over the last three months. The US Federal Reserve kicked off their much-anticipated rate-cutting with a 0.5% cut. The European, Swedish and Swiss central banks also cut rates. The Bloomberg Global Agg Index (NZD Hedged) returned 1.1% for September, and 4.0% for the third quarter. By contrast the MSCI ACWI Index (NZD Hedged) was up 1.6% for September and 5.5% for the quarter. The Kiwi was higher over the month versus most of the majors, so monthly returns were negative for unhedged investors, down -2.7%% for the month, but up 4.6% for the quarter. Closer to home NZ equities were up in both June (0.4%) and over the third quarter (5.1%).
The key pieces of economic data in the third quarter were US labour market metrics showing a weaker trend in some areas. This may have been a factor in the US Fed’s decision to cut by 50pts to launch their easing campaign. The more recent employment data has actually strengthened again, with the September jobs report coming in well ahead of consensus. The other key piece of news was a new policy stimulus package from the People’s Bank of China and regulators. This included support for the local property market, and liquidity provisions to support lending and stabilize the property market and broader equity markets.
The returns across the various sectors were very different to previous quarters where growth-focused sectors like Information Technology and Communication Services have dominated. Interest rate sensitive sectors such as Real Estate (+16.1%) and Utilities (+15.9%) led the way over the third quarter. Industrials, Consumer (staples and discretionary), Materials and Financials all returned around 9%, while Energy (-3.1%) and IT (0.9%) were the laggards. On a regional basis the Chinese (+16.1%) and Hong Kong (+19.3%) markets outperformed all others by some distance following the announcement of the policy aimed at bolstering China’s economy and stock market. The US, NZ and Australian equity markets returned around 6% for the quarter, while the UK (+0.9%) and Japan (-4.2%) underperformed the broader market.