COMMENT:

We've reached the midpoint of the year, and some interesting themes have emerged across financial markets.

Global economic activity has been steady over the first half of 2018, although the backdrop has certainly changed from synchronised growth to something a little patchier.

The US remains the pick of the bunch. Economic growth in the June quarter will be strong, unemployment has fallen to an 18-year low and small-business optimism is at the highest level since 1983.

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The rest of the world looks mixed, with Europe muddling through ongoing political drama and China in the firing line over tariffs.

The local economy remains solid, but there are increasing signs of a slowdown. House prices in Auckland declined again during the first six months of this year, and while the rest of the country saw a small rise, the big gains of the past decade are certainly behind us.

Unemployment is at its lowest in a decade, although economic growth for the March quarter was equal slowest since 2013. Migration remains high, but last month posted the lowest annual gain since January 2016. Business confidence has been in negative territory for nine consecutive months, the longest stretch in more than 10 years.

On a more positive note, the export sector is picking up some of the slack. Fonterra is forecasting a milk payout this season of $7.00, which would be the highest in five years. It's not just a dairy story either, with numerous other industries performing very well on the global stage.

A bit of currency weakness is helping push that theme along. The NZ dollar is down against most trading partners, in particular the resurgent US dollar. Our currency is down almost 5 per cent against the greenback, and is at the lowest levels in more than two years.

The last six months have been a mixed bag for global shares, which are down 1.5 per cent overall, dragged lower by a 10 per cent decline in emerging-market shares.

After starting the year with the strongest January performance since 1997, US shares have been volatile. The S&P 500 eked out a 1.7 per cent gain in the first six months, but failed to regain those January highs. Technology and consumer stocks have been the top sectors, both posting gains of more than 10 per cent.

Australian shares had a solid half, rising 4.3 per cent to a 10-year high and posting the best quarterly performance since 2015 in the three months to June. The local market was again very reliable, with the NZX 50 up an impressive 6.5 per cent so far in 2018.

Finally, rising oil prices have been another big story this year. US crude has rallied more than 20 per cent to the highest levels since 2014.

Unsurprisingly, there is plenty to look forward to over the second half of the year. Trade tensions loom as a big one globally, while the steady decrease of central bank support will keep markets nervous.

On the local front, early feedback from the tax working group (due September) will be important. We will also be watching the economy to see if pessimistic business sentiment remains just that, or turns into something more concerning.

Mark Lister is head of private wealth research at Craigs Investment Partners