“We may see a few bad corporate earnings and their share price slides. We are waiting for the chance to buy in as events unfold in the US.
“We want to put our money to work and we are continuing to get in front of companies and looking for investment opportunities.”
Fisher Funds had three staff members in the US fitting in 20 meetings in a week, talking with companies they have invested in, their competitors, suppliers and industry experts.
Two more staff members were travelling to Australia and another two to Europe. They were portfolio managers and investment analysts.
“It’s important to be in front of the people running the businesses and build a wealth of knowledge in any given market and domestic economy,” Gardyne said. “We may come across companies we haven’t heard about that have interesting products and growth prospects. It’s a fact-finding mission to discover the companies we should be investing in.”
Fisher Funds has already found some interesting companies such as Edwards Lifesciences, which makes artificial heart valves to do the work of the aorta; luxury handbag manufacturer Hermes; and US flooring retailer Floor & Decor. Fisher Funds had earlier invested in the US Dollar chain stores, which had benefited from the recession.
Gardyne says there is still growth potential in the Magnificent Seven technology stocks. Alphabet (the owner of Google) and Meta (Facebook, Instagram and WhatsApp) will benefit from the rise in digital advertising, and Amazon and Microsoft from the move to cloud infrastructure.
“The US is still a great place to invest in when you consider digital advertising, artificial intelligence, e-commerce and medical devices. The country has a band of phenomenal businesses with structured growth – you just have to make sure you don’t overpay for them.”
Fisher Funds has $26 billion in assets under management spread over three KiwiSaver schemes and eight managed funds, with investments by more than 500,000 Kiwis. After buying Kiwi Wealth in late 2022 and adding 270,000 members, Fisher became the third-biggest KiwiSaver provider and reclaimed its default provider status.
Fisher offers a total of 17 unique KiwiSaver fund options across three schemes, providing flexibility to align with various investment preferences and life stages.
Gardyne said the KiwiSaver strategy is to run diversified portfolios that help reduce volatility. “When the tariffs were announced [on April 3 NZT] and markets were falling, we rotated our sharemarket targets – adding some new names to capitalise on the weaker prices.
“We also took some money out of government bonds [at a 4.5% rate] and bought more corporate bonds, which are yielding 6-8% – a spread we haven’t seen for a while.
“We made some reasonably significant changes in the portfolios, largely in the US during April.
“When share prices of big technology and high-growth companies fell up to 25-30% off their highs, we bought some and sold more defensive stocks that had held up better. They are still great companies.”
Gardyne said the market volatility was a good reminder that KiwiSaver is a long-term investment vehicle and “if you hang in and ignore the ups and down, you can come out unscathed”.
There have been a few examples of the volatility over the last five years. “Markets were down 30% in the first four to five weeks of the Covid outbreak,” Gardyne said.
“They fell in 2022 [as inflation surged and interest rates rose] and again last month. But since ‘Liberation Day’, the markets have quickly bounced back.
“We have long-time clients who have been through the ups and downs and have learned to sit tight. If there is another period of volatility, they don’t call us. They just hang in and it’s a strategy that has worked over the last 10-15 years.
“Clients close to retirement might want to reassess their risk tolerance and we will be in touch to ensure they are in the right fund.”
Gardyne says markets were now waiting for the end of the 90-day pause on tariff implementation and seeing the new trade rules and the lay of the land.
“During the pause we’ve seen [in the US] businesses pulling back on investment decisions and consumers pulling back on spending such as holiday travel. The more it drags on, the more the economy will be impacted. There could be some collateral damage.”
He says the initial estimate is that US gross domestic product could be impacted 1%-1.5% as inflation rises, company profit-making and revenue fall and consumers hold off spending.
“But it’s still early days until we see the lay of the land,” Gardyne said. “I don’t think the tariffs will be agreed in 90 days. We will see some brinkmanship between countries and some lines drawn.
“There will be some concessions and we will see some trade barriers put in place. Some businesses will look to source goods from different markets, such as Apple producing more iPhones in India than China. There will be adjustments in the supply chain and it will get back to more normal levels as we go through the year.”
Gardyne says 10% tariffs are sustainable and can be handled by the consumer, but if they are too high, they can damage the economy.
“One of the key things we are watching out for in the outcome of the negotiations is the level of trade friction that has been planted. We will then make assessments on different countries and companies.
“We are closely watching the talks with India, Japan and other Asian countries, and the negotiations between the US and China.”
Some commentators have been predicting a recession in the US but the latest economic data has proved otherwise. The economy added 177,000 jobs in April, beating the expectations of 138,000. But there were net downward revisions of 58,000 to the prior two months. The unemployment rate remained steady at 4.2%, while average hourly earnings grew by a modest 0.2% month-on-month.
April’s jobs report underscored the labour market’s resilience in the face of trade policy uncertainties and the market volatility. Gross domestic product in the US fell at a 0.3% annualised pace in the March quarter, driven by a surge in imports before Donald Trump’s tariffs deadline. It was the first quarter of negative growth since 2022.
While the US economy is slowing down, China’s annual growth rate steadied at 5.4% in the first quarter, the strongest rate of expansion since the second quarter of 2023 and well above estimates for a slowdown to 5.1%.
Gardyne says the 90-day pause has been important and there’s nothing in the data that suggests the US is hurtling towards a recession.
“Imports are only a 15% portion of the US economy and tariffs are not a tax on all the gross domestic product, just on the goods bought from offshore,” he says.
“Some prices will go up but not on domestically-produced goods. A 1-1.5% economic impact on gross domestic product is not enough to drive the US into a recession.”
Gardyne says clients have asked whether Fisher Funds will be more cautious towards US investment and not have as much exposure.
“Over the last 15 years, the US market has outperformed the rest of the world, up 200% on Europe. Europe is finally starting to stimulate growth and the US is looking more expensive on multiple valuations.
“There’s a bit of an argument in moving money from the US at the margin, but you can’t be too hasty. The US has successful companies like Netflix, Amazon and Nvidia and they aren’t going anywhere.
“Some companies will put up impressive financial results and you don’t want to be black-and-white in picking markets. We will find opportunities in each market as we go along and create a diversified portfolio,” says Gardyne.
● Fisher Funds is an advertising sponsor of the Herald‘s Capital Markets and Investment report.
