Stability the key word for shares
Stockbrokers’ stated optimism for the year ahead on local and global sharemarkets is subject to a pretty big proviso: no more global financial crises, please.
The catchphrases of the past few years – the ‘‘credit crunch’’, ‘‘the GFC’’, ‘‘euro woes’’, the ‘‘debt ceiling’’ – have settled, and equities markets could be looking at a second year without catastrophe.
J B Were investment strategy group adviser Bernard Doyle said investors could take heart from relative stability, even if the growth in their returns was not spectacular.
‘‘It won’t be a blockbuster year for growth, but it could be a year where for consecutive years . . . you haven’t had some extreme bouts of risk events or worry about, like, a European collapse or markets teetering on the abyss again.
‘‘If we get two years in a row where markets aren’t concerned about existential threats – threats to the financial system – that will be the biggest achievement.’’
But there is already a problem on the horizon. The powerhouse United States economy is running out of financial road and heading for a ‘‘fiscal cliff’’.
At the bottom of that particular canyon lies Greek-style austerity measures which would equate to more than 5 per cent of the GDP of the US and lead to an almost certain recession.
However, the American political divide would have to grow to Grand Canyon proportions for a disagreement on government budget policy to push the country into such serious economic repercussions.
On the plus side, China had managed to manoeuvre its economic levers appropriately to avoid the mistakes of the Western economies, said MSL Capital Markets’ Peter Elenio.
‘‘Chinese authorities worked so hard to try and take the air out of their economy, to try and learn from Western mistakes, including everything from trying to keep inflation down and making sure that banks didn’t lend too much. ‘‘They do actually have the ability to turn the tap on again, and I think we’re seeing signs of that now.’’
However, Doyle said the New Zealand sharemarket had actually benefited from the recent global stability concerns, as investors looked for off-the-radar equities with high yields, which New Zealand companies specialised in.
Investors were happy to buy cheap then, but would be looking for tangible earnings growth from those companies in the new year, he warned. ‘‘We could have a 10 to 15 per cent year, quite possibly.’’