Looking back over 2019, global share markets give us another reason to celebrate. The global economy continued to expand, businesses continue to grow and global share markets have risen over 20% from the previous year, well above the average historical yearly return of around 10%.
Although such strong performance may seem surprising, a yearly performance for global shares of 20% or higher actually happens on average every 1 in 3 years.
The illustration on the right shows the US share market’s annual performance going back to 1871. If you split every year up by performance, this shows just how often 20%+ or higher returns happen!
When you look back at 2019, there has been a lot going on. Global politics, trade uncertainty and slowing economic growth all featured in the headlines this year. Despite all of these factors, overall growth has been supported by consumer spending, businesses and global import/exports all performing fairly well.
If you’re invested in one of our Multi-Sector KiwiSaver funds these patches of positive returns could benefit you. Increased value in global shares supports the growth-assets part of your investment. The more growth investment you have in your fund, the more effect that global shares performance will have on your KiwiSaver fund, both up and down.
It is important to note how these returns, whilst quite appealing, are above the average historical returns of 10% per year. We want to make sure you are in a fund suitable to your investment timeframes and goals and not just chasing the top performance. Markets, and global share markets especially, move up and down quite a lot over time so you have to be comfortable with those lows as well as the highs.
Following last year’s moderate decline, this year’s strong performance provides further confidence in the idea of ‘sticking out’ any patches of short-term volatility that you would expect when investing for the long-term. While performance in 2020 may be above or below the long-term averages, the broad economy is likely to continue to support markets growing over the long term. If you would like to read more about the ups and downs markets can bring and how they impact the long term, check out this piece by David Beattie on the Booster Blog – “the siren call of best performing funds”.
November saw positive results from global share markets. Growth from around the world this month was largely due to the United States and China finally making some progress on resolving their trade disputes after the last 18 months. Business confidence in both countries has also improved suggesting improvement in the global economy.
While global share markets gained 4% on this optimism, New Zealand shares increased slightly more. This was due to shares in retirement village operators performing well this month and some signs that the housing market, Auckland in particular, may be bouncing back.
Also in New Zealand, the Reserve Bank surprised many by keeping the Official Cash Rate on hold at 1%, rather than cutting rates further as expected. The reasoning was due to more positive signs from the local economy although they reiterated that interest rates would be kept low for now. This is great news for consumers and businesses alike as these factors continues to support the growth in the local economy. Standout positive returns in local share markets during November were A2 Milk and Pushpay (both returning close to 20%) with the additional support from shares in the retirement sector.