Multi-Asset

Investment Insights by our experts and thought leaders

Global multi-asset outlook 2024

Our investment themes for 2024 focus on key features of a world in transition. They include higher-for-longer rates, production shortages in natural resources and the search for new sources of productivity. Transitions are never easy, and features of the old world accustomed to low rates may not make it. We believe that some of these old-world features could pose systemic risks as “creative destruction” does not always run smoothly.

Asia: A Shortage of Dollars

The media is abuzz with stories about the demise of the US Dollar as a reserve currency and the rise of alternatives, such as the proposed new “BRICs” currency. From our perspective, we cannot think of a worse monetary idea than a pan-BRIC currency. It is difficult to conceive a less optimal currency area i.e. one worse than the Euro Area, which has certainly had (and continues to have) its problems.

Just Passing Through?

There was quite simply nothing not to like about the latest US consumer price index data; not only was the headline a good number but so too were most of the internals.

Key Points: An Anaemic Recovery

Our Gravity Index for China has made only a very modest recovery so far this year.

2023 Global multi-asset outlook

On balance, we are constructive mainly for valuation support and growth prospects improving for China with a firm tailwind from an easing dollar. Pockets of the US equity market may struggle on weaker earnings, but the rest of the world should still fair relatively well provided the US does not enter a deep recession.

New Zealand Fixed Income Monthly – April 2022

It has still been a tough year so far for New Zealand bonds amid pressure from inflation. That said, the market in New Zealand has been an outperformer among global peers since the beginning of 2022.

Relief rallies are always encouraging but do not necessarily portray parting clouds for a return to “normal” market conditions. The market is still digesting a rather dizzying array of challenging dynamics that have unfolded quickly over the last quarter.

New Zealand Fixed Income Monthly – March 2022

The New Zealand bond market has experienced a rough start to 2022. The chief driving market factor has been the upward movement in reference interest rates, with the swap and government curves all moving up as central banks turn hawkish to fight inflation for the first time in a generation.

New Zealand Equity Monthly – March 2022

This month we focus on A-REITs, which are larger and more liquid relative to their New Zealand peers. One of the sector’s benefits over its New Zealand counterpart is its simple numerical advantage: Australia boasts 34 REITs, which is three times the number of REITs in New Zealand.

The Russian invasion of Ukraine has created significant uncertainty for investors. Prior to the war’s outbreak, central bankers were already facing a challenging inflationary environment, and these new commodity-driven price pressures are set to complicate matters even further.

New Zealand Fixed Income Monthly – February 2022

We think the New Zealand bond market looks very attractive relative to the rest of the world given how high our interest rates are. At the same time, we certainty aren’t immune to developments in the rest of the world, particularly the US, where the Federal Reserve is poised to begin raising rates.

New Zealand Equity Monthly – February 2022

The New Zealand market recovered well from the global plunge in equities seen in response to Russia’s invasion of Ukraine on 24 February. The current events in Europe have had very little immediate impact on New Zealand, particularly from a corporate earnings perspective.

The outlook is currently challenging. Tightening is coming, but it is not here yet and in the meantime current policy remains quite accommodative. There is no doubt that extremely easy policy boosted equity prices, which were reinforced by strong earnings. Still, we believe organic growth can continue.

New Zealand Fixed Income Monthly – January 2022

Inflation is creating challenges for the New Zealand bond market and economy. In line with bond markets around the world, New Zealand’s market has had a difficult start to 2022. Bond yields and interest rates in general have been climbing as central banks hike rates to tackle soaring inflation.

New Zealand Equity Monthly – January 2022

We see the volatility in the New Zealand markets as an opportunity to focus on new companies for which we have a high degree of confidence in their earnings.

As is often the case, markets are a better reflection of general sentiment than news headlines and so far, it points to an ongoing global recovery as equities hold their gains of 2021 and long-term bond yields rise. It may not be time yet to write off more difficult scenarios derived from the outbreak of Omicron, but facts so far do speak more positively than just one month ago.

New Zealand Fixed Income Monthly - November 2021

New Zealand faces the same kind of uncertainties other countries are confronting due to the global pandemic. But New Zealand, in some ways, has been in the vanguard of recovery from the COVID-19 outbreak.

New Zealand Equity Monthly – November 2021

COP26 included a pledge by New Zealand and 100 other countries to achieve 30% cuts in methane emissions by 2030. Similar progress is being seen in the area of corporate disclosure as New Zealand is set to have its first climate-related disclosure standard by the end of next year.

The global outlook still looks positive, but less is known about the potential impact of the latest variant of the COVID-19 virus, Omicron—particularly in light of the fast government response to add restrictions on travel and, in some cases, local mobility.

We maintain a constructive view of risk assets but are cognizant that the path toward realising gains will be more delicate as we traverse the course of the Fed and other central banks removing their easy policies.

Has economic data really changed so much as to suggest an inflection point on inflation and the growth outlook was near? To some degree perhaps, at least in the eyes of the market, but not enough in the end for central banks to meaningfully change their guidance.

New Zealand Fixed Income Monthly - October 2021

October was a tough month for the New Zealand bond market with yields rising in anticipation of further increases in cash rates and in response to global markets bracing for the possibility of central banks reducing stimulus by tapering bond purchases.

New Zealand Equity Monthly – October 2021

The New Zealand stock market has been flat in the calendar year to date, with companies working to adapt to a number of risk factors. This puts it in stark contrast with markets in the rest of the developed world, which have seen gains ranging from 10% to 25%.

Multi-asset Monthly - October 2021

Volatility has arisen as we expected it eventually would, and September is often an apt month to rediscover risk given market participants’ return from summer vacations noting that record high equity markets do not quite square with a number of significant risk events on the near-term horizon.

New Zealand Equity Monthly – September 2021

The equity market reaction to New Zealand’s second COVID-19 lockdown has been far more muted than the first time similar restrictions were imposed. The first lockdown from March 2020 caused an aggressive sell-off as investors and companies alike adjusted to a completely unprecedented situation.

New Zealand Fixed Income Monthly - September 2021

Since the Reserve Bank of New Zealand (RBNZ) postponed a widely expected rate hike in August, pricing in the market has pulled back, supporting a view that the central bank will hike rates by 25 basis points (bps) at each of its next three policy meetings.

The Alternative Fund: Rephrasing Multi-Strategy

We have found most surveys classify the Multi-Strategy Fund as ‘growth’, which is somewhat ironic given that it isn’t ‘growthy’ enough to warrant more than a 5% weight in the growth fund.

Solving the Downsides to Hedge Funds

It is well known that issues of fees, complexity and illiquidity are reasons often used to dismiss investment portfolios that include hedge fund strategies.

Do hedge fund strategies have a place in KiwiSaver?

The short answer is: it depends on the hedge fund you are looking at, and how they’re implemented to a wider KiwiSaver portfolio.

Latin America: Supplier to a commodity-hungry world

Inflation is on everyone’s mind. From central bankers to bakers, it is one of the biggest topics of discussion. The prices of many commodities are rising sharply. The reasons vary. Supply constraints, sharp rise in demand or bad weather—take your pick.

Multi-asset Monthly - September 2021

As we contemplate a post-pandemic world, it is becoming more likely that things will not return to “normal” as we once knew it. While vaccines have been highly successful in preventing serious illness in those who are still contracting the virus, the Delta variant of COVID-19 is also proving to be harder to contain.

Staying adaptive to an evolving recovery

The world is settling into a new normal that is likely to look quite different from pre-COVID-19 norms. This includes different patterns of demand shaped by learning to live with the virus and an ongoing fiscal thrust with firm policy objectives.

New Zealand Equity Monthly – August 2021

With the reporting season in full swing, this month we turn our attention to New Zealand’s corporate results and announcements. In particular we focus on the COVID-19 pandemic and its effect on such results and highlight how changing demographics have provided opportunities for certain sectors.

New Zealand Fixed Income Monthly - August 2021

The detection of New Zealand’s first COVID-19 Delta variant infections and the subsequent decision by the Reserve Bank of New Zealand (RBNZ) to postpone a widely expected rate hike muddied the country’s outlook in August. The economy was previously running at a strong pace with unusually high inflation of 3.5% and very low unemployment.

Multi-asset Monthly - August 2021

Cross-asset pricing has recently been challenging our reflationary outlook. When we first discussed the prospects for reflation about a year ago, we identified a number of key factors.

New Zealand Equity Monthly - July 2021

This month we turn our focus to environment, social and governance (ESG) issues. ESG is firmly in the spotlight at present, and this trend will only intensify in the future. In global terms, Europe’s level of ESG legislation is more advanced than New Zealand’s and ESG is more of a hot topic there.

New Zealand Fixed Income Monthly - July 2021

New Zealand’s bond market performed well overall in July, although the long term sector outperformed its short term peers significantly.

New Zealand Fixed Income Monthly - June 2021

New Zealand’s bond market was relatively flat in June, although most sectors were on the positive side. Looking ahead, New Zealand appears set to track the US, where interest rate hikes could now happen as early as 2022.

New Zealand Equity Monthly - June 2021

This month, we take a look at the current state and prospects of New Zealand’s five main electricity generators/retail providers. Almost all the electricity in New Zealand is generated by five companies: Genesis Energy, Contact Energy, Meridian Energy, Mercury Energy and Trustpower.

Multi-asset Monthly - July 2021

The US and China are likely reaching peak growth as stimulus and the initial burst of pent-up demand begin to wane. In China, while the credit impulse has turned negative—usually an ominous sign—demand continues to normalise, shifting from outsized demand in manufacturing back to normal patterns of consumption with authorities still fine-tuning the extension of credit to the parts of the real economy that need it.

New Zealand Fixed Income Monthly - May 2021

We believe that the recent rise in New Zealand’s interest rates has put the bond market in a good place, as the alternative may have been a negative interest rate regime instead. Without higher interest rates the government would have found it difficult to fund itself, as the country’s bonds may not have otherwise been attractive to offshore investors.

New Zealand Equity Monthly - May 2021

The New Zealand equity market has been blessed by strong upward revisions in corporate earnings and a robust macro framework, with the country further along than its peers in a V-shaped recovery from a COVID-19-induced downturn.

Multi-asset Monthly - June 2021

Despite very bumpy economic data—particularly on inflation—rates have compressed, implying most of the “surprises” have already been priced in. This is positive for growth assets that respond better to yield curve stability than the sudden steepening that defined the first quarter.

Multi-asset Monthly - May 2021

The US Treasury (UST) market has been an important barometer of the reflation trade for markets this year. Most asset classes have performed in line with movements in UST yields as correlations, whether positive or negative, remain strong.

Multi-asset monthly - April 2021

As reflationary dynamics gain support from refreshed stimulus in the US and a largely successful vaccine rollout with returning growth already to show for it, the reflation trade appears a bit exhausted as measured by market action. However, we see the current dynamic more as a pause than a conclusion.

Multi-asset monthly - March 2021

The strong start to the year for global equity markets hit its first bump in the road in February. While most countries are still delivering a positive return for the year, markets have retreated from their highs to varying degrees.

Multi-asset monthly - February 2021

Markets have become choppy, particularly toward month-end, and we expect more of the same given the nearly unrelenting strong run in risk assets since late March 2020 that gained fresh momentum early in November following the US elections.

Multi-asset monthly - January 2021

2020 will undoubtedly be remembered as the year of the pandemic. While in financial market terms it is now tempting to think of COVID-19 as old news, the virus still presents substantial risks to the economic outlook.

2021 Global Multi-Asset Market Outlook

The year 2020 is one most would like to forget, but for markets, performance was particularly strong despite the substantial COVID-19-related economic fallout. Certainly, ample liquidity in the form of massive monetary and fiscal stimulus was a key driver of performance, but near-term optimism may also be warranted. The vaccine rollout could return demand to more normal levels in 2021 and potentially beyond, given the pent-up demand on the back of still-massive amounts of liquidity sloshing through the system.

Multi-asset monthly - December 2020

While economic data is likely to remain soft, driven by the more recent lockdowns in the US and Europe, markets are rightly looking through the near-term gloom as impending vaccines for COVID-19 are showing the proverbial light at the end of this nightmarish tunnel. Over 2021, the world, in our view, should gradually return to some sense of normalcy as the pandemic slowly recedes in the rear-view mirror.

Global Investment Committee Outlook: Especially buoyant non-US equities

Although some on the committee agreed with the market consensus for a moderate continuation of economic growth and equity markets, and a few were even more cautious, especially regarding increased fears of inflation later in 2021, the majority agreed with a more positive scenario in which the global economy outperforms market consensus, while equities, especially those outside of the US, rally sharply.

Multi-asset monthly - November 2020

With the US presidential election now behind us, the two candidates seem to be proceeding in parallel universes. The apparent winner, President-elect Joe Biden, has transition planning and inauguration on his mind while President Donald Trump continues to challenge the election process itself.

US presidential election – Nikko AM’s views

In order to gain a range of perspectives on the US presidential election, Nikko Asset Management has gathered the views of the following experts and investment teams, representing many of our major asset classes and geographical regions.

Positioning for reflation

Coordinated fiscal and monetary stimulus is likely to support global demand and therefore reflation in the years ahead. We see this opening up broader growth opportunities, and ultimately better scope for portfolio diversification.

Multi-asset monthly - October 2020

October 2020 Second and third waves of the virus will also slow the recovery. But importantly, mortality rates have been lower, suggesting that the world continues to learn to live with the virus without requiring broad lockdowns.