For the first time in years, New Zealand's sharemarket has been left in the dust by its international peers on Wall Street, in Europe, Australia and even the UK.
"It was a challenging first half of 2021 for the NZX50, with a negative capital return at approximately 5 per cent," said Adrian Allbon, director, equity research at investment and advisory group Jarden.
"In comparison, the ASX200 saw an increase of 11 per cent and the S&P500 was up 13 per cent.
"That said, we've experienced a relatively stable New Zealand market over the last six months, with generally less day-to-day volatility compared to 2020. This has provided a more fertile backdrop for selecting stocks."
So despite that sluggish index performance, returns for players at the top of the table in our annual Brokers' Picks game are still looking strong.
Brokers' Picks - which uses total shareholder returns (dividends plus or minus changes in share prices) - sees the NZX50 sneak into the black for the game period.
Frankly, that figure would have been looking a lot better if we could ignore the big slump in a2 Milk.
Formerly the largest stock on the NZX by market capitalisation, a2 is off by 41.1 per cent from the start of the Brokers' Picks game on December 21, to the half-year close at June 30.
That creates a clear divide for participants this year.
Most of those who picked a2 among their favoured stocks (Hamilton Hindin Greene , MSL Capital and sharetrader.co.nz) have been dragged into negative territory.
"A2 Milk and Synlait continue to be impacted by the daigou [unofficial trade] unwind, excess inventories, and rise of domestic competition in China infant formula," Allbon said.
Daigou, sometimes called the grey market channel, involves individuals buying infant formula from pharmacies and supermarkets, and sending it to associates and businesses in China.
That trade was disrupted when Covid-19 stalled travel between China and Australasia.
Meanwhile, leading the Brokers' Picks table at the mid-year point, Forsyth Barr has enjoyed a return of more than 20.7 per cent - lifted by strong performance by consumer-focused stocks Kathmandu and Skellerup.
Running a close second at the mid-year mark is Jarden - up 19.7 per cent. It was lifted by good returns for Mainfreight, Ebos and a stellar return for Turners Automotive.
"The best-performing stocks on the NZX50, in the first half of this year, are mostly made up of players in the Covid-19 recovery," Allbon said.
"These include Vista Group, Serko, Kathmandu and Restaurant Brands, as well as domestic exposures like Fletcher Building, Freightways and the banks."
The Warehouse has also been a strong performer, its 45.9 per cent gain offsetting a2 in Hobson Wealth's picks and keeping it in the black.
"The recovery plays are coming off depressed bases, and domestic exposures are reflecting strong macro-economic activity," Allbon said.
"Turners Automotive (although outside the NZX50) was a key performer for us – reflecting these solid macro conditions, a focused organic strategy and solid execution on risk pricing."
It would be easy to look at the NZX and assume sharemarkets have been mediocre this year, but that's not the case, said Mark Lister, head of private wealth research at Craigs Investment Partners.
"We hit an all-time high in the first week of January and since then we've been down and treading water," he said.
"In the past the NZ market has been one of the top performers and others are lagging ... so that's been interesting."
Luckily, many KiwiSaver investors with their money in a growth fund will be doing much better because those funds would have had investments in international markets, he said.
"The general theme in the market had been that this was the back-to-business recovery year," Lister said. "Last year was the hunker down flight to safety year.
"So generally, the winners and losers this year should be the opposite of last year – and for the most part that's true."
Obviously there had been some - like a2 - with their own specific issues, he said.
"I would have said a2 was probably a Covid recovery stock. We didn't pick that one but I would have said that at the start of the year."
Ultimately, the NZX hadn't performed so badly if we excluded a2's return to earth and the dip in last year's star performer, F&P Healthcare, he said.
"I'm not losing any sleep at all over the state of the local sharemarket. If anything, some of the malaise, across some of those stocks, provides opportunity for people."
Oliver Mander - who organises the stock picking game at online retail investing group sharetrader.co.nz - said more of his members were outperforming the broader New Zealand market than in previous years.
Sharetrader's top five picks for the Herald game have it lagging the pack - largely due to the poor performance of a2 Milk and tech stock Plexure.
Plexure was one of the stars of 2020 but is off by 36.1 per cent in the game this year.
About two-thirds of the players in Sharetrader's own brokers' picks game were beating the NZX50 index, as opposed to about 50 per cent in previous years.
"So it's actually a better result than we normally get," said Mander.
"What it possibly tells you is because they're not just picking large-cap stocks. I think small-caps have probably outperformed this year.
"If you've got a well-rounded portfolio covering small-caps as well as the base stocks in the NZX you're probably still doing very well."
That really highlighted the need to stay diversified, Mander said.
"If you look further afield, New Zealand is well behind Australia and the US this year. First time in a while. But it's actually the same message. New Zealand should not be 100 per cent of your portfolio."
The big macro-economic trend hanging over the local sharemarket, relative to its international peers, is that New Zealand is ahead of the curve when it comes to expectations for rising interest rates.
Higher rates make safer, cash investment more appealing and are also a drag on businesses carrying high levels of debt.
The prospect of the US Federal Reserve lifting interest rates to head off inflation regularly rattles Wall Street.
But the US Fed has been less bullish on rate rises than our own Reserve Bank, which now forecasts that the official cash rate will rise in the middle of next year and keep rising through 2023.
Many market economists now expect inflation pressure could mean the RBNZ will be forced to hike even sooner.
"The key macro debate over the first half of this year has been the return of inflation - transitory or permanent - and the flow-on impact on interest rates," said Jarden's Allbon.
"The latter point is particularly relevant for the NZX50 given the dominance of large-cap growth and long-dated utilities in our index."
Lister agreed. The NZX was "absolutely" being hit by the interest rate story, he said.
"Our economy got things back on track much more quickly than others. You look at parts of the US, UK, Europe, they have only just seen the restrictions come off," he said.
"We were already there through last year. Now those other parts of the world are experiencing the upswing we experienced six-eight months ago."
New Zealand typically did quite well during periods of global economic uncertainty, Lister said. That tended to go hand in hand with lower interest rates.
Our market underperformance so far this year was also a reflection of the makeup of our market, he said.
"You'd almost think the economy must be struggling. Well, actually, our economy is going great guns by lots of measures."
It was a reminder that the NZX doesn't very accurately reflect the nature of New Zealand's economy, he said.
Disclaimer - It's a game
Readers should recognise that the results of the Brokers' Picks are skewed by some features of the game. The figures exclude brokers' fees. Brokers are asked to choose the securities that will give the best short-term performance. If they had been asked to choose, for example, a five-year term, the results might be different. The survey does not allow brokers to review choices during the year. The survey implies a one-size-fits-all approach. It takes no account of individual circumstances such as an investor's appetite for risk, need for income or tax circumstances. The views expressed do not constitute personalised financial advice and are not directed at any person. Finally, past performance is no guarantee of future performance.
Correction: An earlier version of this article said Oliver Mander runs the sharetrader.co.nz website. In fact he just organises the stock picking game. He is neither a shareholder or employee of sharetrader.co.nz.