Frank Aldridge is bullish on the outlook for the New Zealand sharemarket amid an ongoing low interest rate environment.
But the boss of sharebroker Craigs Investment Partners questioned whether local equities could keep up the gains they have delivered over the past 12 months.
The S&P/NZX 50 has jumped around 15 per cent in the year to date as low interest rates kept many stocks popular with investors seeking income through dividend payments.
"I'd hazard to say the gains that we've seen over the past 12 months won't be repeated over the next 12 months," Aldridge said.
Still, he said equities would continue to deliver "sound" returns as investors "continue to look for yield".
The reporting season was reasonably robust in terms of earnings and balance sheets for corporates. "While interest rates stay around the levels they are at, or possibly go even a little bit lower over the next six months, we still see markets -- in particular the New Zealand market -- remaining solid."
The New Zealand sharemarket's bull run is well into its seventh year, with the NZX 50 having soared close to 200 per cent since early 2009.
Kiwi shares, particularly the blue chip stocks that pay solid dividends, have been in vogue with investors around the world.
The NZX 50 is now trading at around 20 times earnings, well above its historical average.
Aldridge said elevated equity valuations heightened the risk of market volatility and investors needed to keep that in mind when constructing portfolios.
"It's really just about ensuring you review portfolios to make sure weightings in certain sectors or certain companies don't get too large or out of proportion if there is a shock or a market pull-back. And realistically there will be a market pull-back on the way through -- that's the nature of the way things work."
Concerns about the outlook for US interest rates contributed to a spike in equity market volatility earlier this month.
"If interest rates start to increase down the track at a rate quicker than some expect, that poses some risk," Aldridge said. "But if things continue in a relatively sound fashion in New Zealand and offshore, I imagine [share prices] will stay around these levels and earnings will to some extent catch up."
While interest rates stay around the levels they are at, or possibly go even a little bit lower over the next six months, we still see markets -- in particular the New Zealand market -- remaining solid.
Outside the sharemarket, he said rising house prices were a risk facing New Zealand.
"Generally speaking it is a concern but having said that it is a supply and demand issue," Aldridge said. "I don't think there's a silver bullet to solving it."
He said Craigs' business had performed strongly over the past few years of buoyant market conditions and the company had grown staff numbers by 25 per cent to around 415 employees since 2013.
"Certainly the company is [still] looking to grow and invest in people and technology," Aldridge said. "We'll probably be a little more cautious over the next one or two years just because of the amount of growth we've had in the last three years."
Frank Aldridge's Top Three:
• Top business priorities for the next 12 months:
- Technology capital expenditure and development.
- Adapting to continual regulatory change.
- Continuing organic growth.
• What's most likely to keep you awake at night?
- Improving operational efficiencies.
- Digital disruption.
- Regulatory challenges.
• Three innovations in the past year
- Expansion into Australia.
- Technology development.
- Product development.