US markets have had a rough ride so far this year. Photo / File
US markets have had a rough ride so far this year. Photo / File
Kiwi investors have been buying up more shares in US-listed companies despite the sea of red in the markets there ahead of tomorrow's Federal Reserve announcement.
The S&P500 is down 8.6 per cent so far this year while the technology-heavy Nasdaq is down 13.46 per cent year to date.
ButNew Zealand retail investment platforms say investors seem to be coping well with the losses so far and don't appear to be panic selling.
Kristen Lunman, chief executive of Hatch, said the two main behaviours it was seeing were either people holding their shares or buying more shares.
"People are just not doing anything, possibly because they don't want to look," she said.
"Long-term investors recognise that share markets will come back so they are happy just to ride it out without emotionally going through that."
While others were either doubling down on their investments by buying more shares in the same companies or rebalancing what they owned after taking a hit from being invested in technology companies and cryptocurrency.
"We are seeing spikes in stocks that are better equipped to deal with rising interest rates - blue-chip companies, real estate and other asset classes that aren't as sensitive to interest rate increases."
Lunman said had this market fall happened when it first launched the platform in New Zealand three years ago there might have been more panicked selling.
"But I think we are in a position now that people are connecting online, there is a lot more education around what to do. No one is happy with what is happening - no one is happy looking at a sea of red. But they are showing great behaviours. Those that have money are taking up the opportunity."
Thursday morning 8am NZ time the US Federal Reserve is expected to make an announcement about its plans for raising the official cash rate.
Lunman said investors would be watching that closely to see how fast the rate increase could happen.
"People will be looking at how aggressive they will be. The share markets will do something - I think that is agreed. It is a gamble at this point to guess which direction and what the sharemarkets are going to do."
Hatch chief executive Kristen Lunman. Photo / Supplied
The US share markets have been falling ahead of the rate announcement.
Sonya Williams co-CEO of Sharesies, said there had been a really shaky start to the year with US markets tracking down and other markets including New Zealand being dragged down some days too.
"We do expect it to be a turbulent year. Largely one of the main causes is around inflation which is the general rising of prices over time. That increased over last year and has continued into this year."
Williams said inflation was rising because central banks around the world had effectively created money to prop up economies during the global pandemic.
"What that has meant is that now inflation is rising, the Federal Reserve is meeting this week and have indicated they might raise interest rates. That is the tool they use to keep inflation under control."
Williams said higher interest rates would make it more expensive for businesses to borrow while consumers will be encouraged to save rather than borrow.
"We can see that playing out in the markets while people are waiting for this result from the Federal Reserve. Higher interest rates also mean investors have options - they might invest in bonds or different things."
She said until the Federal Reserve meeting result coming out the market would be volatile.
"There is also some geopolitical things going on with Russia that is also affecting this as well. Markets respond to uncertainty. We all know that we are in a period of uncertainty."
Williams said it was early days yet and they hadn't seen any massive shift in behaviour from users of the Sharesies platform.
"We still see strong numbers coming on to the platform - so new investors signing up. The buy and sell values that we are seeing are typical. But the numbers of people that are buying and selling is creeping up a bit more than normal."
Williams said falls in markets were normal and part of share investing.
"Investing is for the long term but there are some things you can do to prepare for market movements - the main thing is how you might be feeling about what is going on when you look at your portfolio.
"The most important thing is time in markets is the most important lever so make investing a habit, prices go up and down and so as you are doing that you are getting the option to buy at a higher or lower price."
She said the other key to remember was diversification - don't pull all your eggs in one basket.
"Then really take that long-term view so when we do go into a correction like this - when we do look back markets do correct themselves over the long term. We encourage people to be thinking about what will be happening over a 10 year period in line with their investment goals."
She said over a long period of time a fall in markets could often appear as just a blip on the chart.
"If something has happened and it changes your strategy then by all means respond to that. But it is about checking in with yourself, not panicking and asking those long term questions."
If checking your portfolio every day makes you feel bad, then question if you need to be doing it, she added.
