It's been a cracking period for investors despite a spell of volatility, Mark Lister writes. Photo / 123RF
It's been a cracking period for investors despite a spell of volatility, Mark Lister writes. Photo / 123RF
The first three-quarters of the calendar year are behind us, and investors have again been well rewarded for ignoring the noise and staying the course.
It’s been a cracking period for investors, despite the volatility.
An agreement between the US and China remains unresolved, with two consecutive three-month extensions to the deadline so far.
The latest of these will expire in mid-November, so that’s something to watch closely in the upcoming quarter.
An undesirable outcome could derail the upbeat tone, so let’s hope the reprieve reflects productive negotiations taking place behind the scenes.
We also saw the world’s biggest central bank cut interest rates for the first time this year.
The Federal Reserve was on hold for nine months, so one could argue this latest move was the first cut of a new cycle.
If that’s the case, it bodes well for the outlook, should history be a guide.
In the 11 rate-cutting cycles since 1980, the S&P 500 was up in eight of them over the following 12 months, with an average return of 8.7%.
When a recession was avoided (that’s been the case in five of those 11 occasions), the market was up 100% of the time over six and 12 months (by an average of 10.8 and 17.4%).
Every cycle is different, as is every economic and market backdrop, but history suggests you want to be invested when rates start coming down.
That’s especially so if the Fed is cutting into a relatively solid environment where a slowdown might be imminent, but not a recession.
It’ll be an eventful period in New Zealand too, and one that will start with an Official Cash Rate (OCR) cut.
New Reserve Bank of NZ Governor Dr Anna Breman. Photo / Mark Mitchell
The Reserve Bank meets on Wednesday, and a cut of 0.25% is assured.
There’s also a chance of a larger 50-point cut, if the bank chooses to act decisively and proactively.
Financial market pricing is only suggesting an outside chance of that, but three of the five major banks are picking it.
If they’re right, we’ll head into Christmas with mortgage rates a touch lower and (hopefully) a pick-up in confidence and activity.
For investors, there’s every chance markets finish the year in good spirits.
If the global economy remains resilient and corporate earnings continue to grow solidly, share prices are likely to remain buoyant.
We also have seasonality on our side, with this home stretch typically a positive period for global markets.
Since 1950, the December quarter has been the strongest of all for the S&P 500, with an average return of 4.5% and an 80% hit rate of positive returns.
If that’s the case again in 2025, let’s hope some of that optimism finds its way Downunder.
Mark Lister is Investment Director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision Craigs Investment Partners recommends you contact an investment adviser.
