Mark Lister, head of private wealth research at Craigs Investment Partners, said the Fed's rate hike and messaging was reverberating through the world's financial markets.
Aggressive tightening by the Fed was putting still more wind in the US dollar's sails, the currency having already been hoisted by its desirability as a safe haven.
And as far as New Zealand is concerned, there is now a straight-out interest rate differential - the top Fed funds rate is 3.25 per cent compared with New Zealand's 3.0 per cent.
That safe haven/interest rate story is heavily weighing on the New Zealand dollar, pushing it down to around 58USc.
While a weak currency is good for exporting companies such as Fonterra and Fisher & Paykel Healthcare, it is inflationary - exactly what the Reserve Bank doesn't want right now.
The commonly held view was that New Zealand's official cash rate would peak a 4.0 per cent but some see it going higher. Last week, ANZ suggested it might hit 4.75 per cent.
"It's bearish for stocks because it is bad for the housing market, the economy and company profits, plus there is the valuation impact," Lister says.
"When you can get a better return from interest rates there is less enthusiasm for taking on risk."
But for all that, Lister said the local sharemarket was holding up quite well.
Fisher Funds senior portfolio manager David McLeish said the Fed's move was on a similar tack to the RBNZ's.
"This gives the Reserve Bank cover to continue with the same rhetoric and with those same actions.
"It certainly feels as if the continued tightening of monetary policy is likely to have a negative impact on economic growth and therefore corporate earnings in the near term, so yes, there is going to be a negative economic impact.
"There is already some pessimism priced into the sharemarket, but certainly the backdrop for the foreseeable future is not going to be particularly stimulative," McLeish said.
Back to normal?
Signs are pointing to trading on the New Zealand sharemarket heading back to pre-Covid levels after two years of elevated activity.
According to the NZX's liquidity report for August, cumulative traded value for 2022 is back at the same level as it was in 2018 and 2019.
This time last year and in 2020, cumulative traded value was already over $30 billion but it is currently tracking around $25b.
The value of wholesale trades has fallen substantially while retail trading has fallen as well.
Dean Anderson, chief executive of fund manager Kernel Wealth, said trading volumes were down around 28 per cent this year.
While investors were not panic selling, he said many had just been sitting on their hands for the past eight months. "We are just seeing inaction."
Investors took their money out of term deposits and invested in shares and property in the last few years as the interest rate on those deposits tumbled to record lows.
An investor would have needed more than $7.8 million in the bank to earn an average income of $65,000 back in December 2020 when the average six-month term deposit rate fell to 0.8 per cent.
But term deposits have bounced back strongly in recent months as the cash rate has risen.
The average six-month term deposit is now 3 per cent according to the Reserve Bank.
Accordingly, bank term deposits have risen from $154b in July 2021 to $168b in July this year, although they are still well below the $185b tally in July 2020.
Anderson said there were questions over whether investors would stay in shares or drift back to term deposits.
He said there had been heightened periods of trading by retail investors in the past but then it typically returned to normal. "That is a big unknown here and around the globe."
One challenge for the New Zealand sharemarket was that investing globally had become much easier.
"It's very attractive and easy to invest in the ASX-listed and US companies. Retaining local interest has got harder."
More capital
Fresh off the back of its $200m equity capital raise, Heartland Group looks likely to need even more capital if it goes ahead with its plans to acquire start-up Avenue Bank as part of its moves to have an Australian bank.
Jarden analyst Grant Lowe said its base case was that Heartland was sufficiently capitalised following its recent equity raise to deliver on receivable growth and net profit.
But he noted the company would need to raise a further $100m to $150m if it acquired Avenue Bank.
Heartland is in talks to buy Avenue - a move which would enable it to enter the Australian banking market and fund its business through deposits, a lower-cost funding model than it currently has.
The move would require regulatory approval, among other criteria, before it goes ahead.
Lowe retained an "overweight" rating on the stock but dropped his target price from $2.36 to $2.09 due to the equity raise and proposed operating changes.
Heartland shares have fallen by more than 20 per cent in the past year.
Upbeat on transport
Brokers Forsyth Barr are upbeat on the prospects for Freightways, Mainfreight and Port of Tauranga.
In a research note, Forsyth Barr said the post-pandemic world is a mixed bag for the transport sector.
"Aviation is enjoying an expected and much needed resurgence, buoyed by strong demand and high yields but constrained by capacity.
"Global airfreight volumes are softening, as are yields, as demand slows and the cost and availability of shipping falls.
"The latter is most evident in container spot rates which have fallen dramatically in recent weeks. In contrast, container contract rates have continued to climb.
In aggregate, realised container rates have fallen from 2021 highs but only modestly, rather than sharply, it said.
While congestion remains an issue for shipping, domestic port volumes appear steady and pricing initiatives by ports are lifting the industry profit pool, Forsyth Barr said.
"Freightways remains our preferred exposure in the sector, followed by Mainfreight and Port of Tauranga."
