Mark Lister
On Investing

Mark Lister: Investors' ride on the rollercoaster

There's no end in sight to the stomach-churning excitment. Photo / Getty Images
There's no end in sight to the stomach-churning excitment. Photo / Getty Images

At just past the halfway point in the year, it's been a highly eventful one already and investors probably feel they have experienced at least a year's worth of excitement.

We had a rough start to 2016, with the US share market falling 11.4 per cent before we even got to Valentines Day. The worries seemed to fade quickly, with a 16.6 per cent rebound taking place in March and April.

Then it was Brexit, which saw the US market decline almost 6 per cent, before rallying back nearly 10 per cent, bringing us to the near record highs we are currently witnessing.

All of this drama has been great for traders who thrive on such volatility. Investors, however, might have found it a little more disconcerting.

Despite the rollercoaster ride, many of the world's major share markets are easily in positive territory year-to-date, with local shares once again performing exceptionally well, having risen more than 15 per cent (including dividends) since the end of last year.

However, the volatility is unlikely to let up anytime soon, with the second half of this year shaping up as an equally busy period.

The fallout from Brexit will continue, despite little noticeable economic impact so far. German business confidence barely moved in July and data from the UK has yielded mixed messages.

Time will tell, but markets will remain sensitive to economic and political events nonetheless, and there are plenty of those on the horizon.

The next big one is America going to the polls in November, but even once we get past that investors will start looking toward elections in the Netherlands, France and Germany in the following 12 months.

Interest rates are much lower everywhere than where they began the year, as hopes of more aggressive central bank easing policies grow. This has been a major driver of the strong rebound in recent weeks, making conditions more susceptible to any disappointment on this front, should central banks fail to live up to expectations.

Among all of this we seem to have forgotten about China, which is sitting in the background with an ever-growing debt burden.

It's unlikely China is out of the woods yet, and there are numerous other geopolitical hotspots that could also re-emerge.

At home, we've got our fair share of action looming. Expectations are high for more interest rate cuts, we need to see if new mortgage restrictions can curtail the housing bubble, while the jury's out on whether the currency will play ball and stay down. There will be plenty of corporate news for investors to digest, with the reporting season set to begin in the coming weeks.

Things have calmed down since that dramatic Friday when the Brexit votes were being counted, but don't get comfortable, there's more to come.

Mark Lister is head of private wealth research at Craigs Investment Partners. This column is general in nature and should not be regarded as specific investment advice.

- NZ Herald

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