What’s been happening in the markets (December 2023) – Goodbye 2023!

In December 2023’s What’s been happening in the markets article we cover the last few product and platform updates for 2023 and review how the markets have performed over the year – Are New Zealand shares really a waste of time?

This article covers:
1. Product updates
2. Market Movements
3. What we’ve been up to

1. Product updates

With many people’s attention on the holidays, December 2023 was a quiet one for news on investment products and platforms. So we only have a few small updates to share this month:

• The end of the Juno KiwiSaver brand – Juno was a KiwiSaver scheme offered by Pie Funds. They’ve recently rebranded to the Pie KiwiSaver Scheme, consistent with the branding of its parent. Nothing else changes, with the funds and fees of the scheme staying the same for now.
• New Aggressive funds – A couple of banks (BNZ and ASB) launched new High Growth/Aggressive managed funds, following shortly after ANZ’s High Growth Fund launch in August. BNZ’s High Growth Fund invests 33% in Australasian shares and 67% in international shares and has a fee of 0.45% for both KiwiSaver and non-KiwiSaver versions. ASB’s Aggressive Fund invests 5% in bonds and 95% in shares, and has a fee of 0.75% for KiwiSaver and 1.18% for the non-KiwiSaver fund. Previously, the riskiest funds that these banks offered were Growth funds (which have a much higher ~20% allocation to bonds).
• Stockfox owner gets banned – Stockfox was a service that provided investors with “tips” for what stocks to buy and when to sell them (which we reviewed back in February 2022). Recently Stockfox’s owner, David McEwen, has come under fire with the Financial Markets Authority (FMA) permanently banning him from offering any financial products. It’s unclear whether McEwen’s ban came about due to dodgy dealings relating to Stockfox itself or one of his other businesses (though when we wrote our Stockfox review we did find a few misleading return figures).
• Sharesies KiwiSaver – Sharesies’ self-select KiwiSaver scheme launched to the public on 29 November. Check out our comprehensive review below:

Further Reading:
– Sharesies KiwiSaver review – Switch or approach with caution?

Highlights of 2023

With market sentiment weak and uncertainty around the economy, our investment platforms have had a relatively quiet year. Here were the main themes of 2023:

• The investment trend of the year was the number of investment platforms launching their own on-call savings products, helping investors take advantage of the currently high interest rates. Sharesies Save, Squirrel On-Call, and Booster Savvy offer better interest rates than the average bank and don’t have any strings attached or penalties when withdrawing your money.
• It’s been a challenging time for some platforms. Sharesies went through with their controversial fee changes, while also cutting staff numbers in order to make their business more sustainable. Stake added a $3 USD brokerage fee, whereas previously all buy and sell orders on the platform were free.
• Some platforms didn’t survive. We said goodbye to platforms including Lending Crowd, Dasset, and Sugar Wallet (who stopped offering Simplicity’s funds).
• It wasn’t all bad news with a few new investment platforms launching in New Zealand such as Tempo, Superhero, and Goldie. Though we’re sceptical about the competitiveness and viability of some of these platforms.
• Investors had plenty of new funds to choose from. Simplicity revamped their funds to fix their tax leakage issues and added High Growth and Defensive fund options in the process. Kernel expanded their range with Global ESG funds, while Smartshares added 5 new ETFs.

2. Market Movements

Here’s how the markets have performed in December 2023 (as at 28 December), in both their local currencies and in NZ dollar terms:

	Local currency	NZD
NZ shares (S&P/NZX 50)	3.87%	3.87%
Australian shares (S&P/ASX 200)	7.44%	8.09%
US shares (S&P 500)	4.83%	1.94%
Bitcoin	12.73%	9.62%

December is traditionally a strong month for financial markets, but this year’s positive performance comes as central banks and economists are predicting interest rates to drop sooner than expected. Lower interest rates make bank deposits and bonds less attractive relative to shares, and is generally seen as positive for the economy as it becomes cheaper to borrow money and service debt. Locally a few banks have already started making small reductions to fixed mortgage and term deposit rates.

Highlights of 2023

2023 was a tough one for many. We grappled with the increasing cost of living, high interest rates, the New Zealand economy slowing and falling into a mild recession, an uncertain housing market, extreme weather events, along with conflicts overseas. Despite the year’s challenges, the markets were positive!

	2023 YTD returns Local currency	2023 YTD returns NZD
NZ shares (S&P/NZX 50)	2.58%	2.58%
Australian shares (S&P/ASX 200)	8.18%	8.78%
US shares (S&P 500)	24.71%	25.06%
Bitcoin	157.22%	157.92%

We’ve always been proponents of sticking to your investment strategy and continuing to invest regularly, regardless of what’s happening in the world. And we think this year’s results are a good example of why investors shouldn’t try to time the market. While we don’t know what’s in store for 2024, those who buy and hold a well diversified portfolio should continue to see positive results over the long-term.

Are New Zealand shares a waste of time?

Another theme we’ve been seeing over the last few years is that NZ shares haven’t performed too well compared to US shares. We constantly see comments along the lines of “NZ shares are a waste of time, only US shares are worth investing in”, but we disagree with this.

• Firstly, we think this logic is flawed – If we applied the same logic in comparing US shares with Bitcoin, you could say US shares are a waste of time since they only delivered a 24% return vs Bitcoin’s 150% return.
• Secondly, investing in shares is a long-term venture and comparing performance over the short-term is inappropriate. It’s like picking the winner of a marathon after just a few kilometres into the race. If we look further back, we’ll find that NZ shares have performed quite well over the long-term. In fact the NZX 50 outperformed the S&P 500 every year from 2014 to 2019.
• Thirdly, past performance doesn’t guarantee future results. This year’s results doesn’t mean US shares will continue to outperform, or that NZ shares will continue to underperform. Much of the S&P 500’s strong performance this year can be credited to the “Magnificent 7” (AAPL, MSFT, GOOG, AMZN, NVDA, TSLA, META), which are exciting mega cap stocks involved in trendy areas like AI. We have no idea if the strong performance of these companies will be sustainable over the long-term. But often this year’s winners tend to be next year’s losers, and we think investing in boring companies (like utilities and healthcare companies) is an important part of a diversified investment portfolio. With its tax advantages and concentration towards “boring” sectors, we think NZ shares can be a good way to diversify away from the tech-heavy US market.

3. What we’ve been up to

For us December is about surviving the last few weeks of work for the year, enjoying a short break over Christmas and the New Year, as well as the usual social events. This month was also an expensive one for us, with lots of spending all happening at once:

• Our car tyres were getting worn and unsafe so we got four new ones – $814.
• We’re keen to do more overseas travel so booked flights to Fiji and Japan – $2,685.
• We booked a couple of return flights to Wellington to visit family. We often take the car for these trips, but have already driven so much this year so decided to fly instead – $498 + 150 Airpoints Dollars.
• Mr Money King NZ ate too much candy and needed 2 fillings at the dentist – $760.

So that’s why we don’t have 100% of our money invested in shares and index funds, and instead stash away some money in our Squirrel On-Call account and Kernel Cash Plus Fund, as we’ll always have a need for cash for short-term goals and expenses – In this case we had almost $5,000 in extra spending to pay for. These savings products won’t make the same returns as shares over the long-term, but having them means there’s no need for us to sell off our precious long-term investments or take on debt to cover this spending.

Outside of our money and investing life, we tried a disappointing croissant and grilled cheese sandwich from Pastrami & Rye, got bagels from Auckland Bagel Club, and saw High School Musical on stage!

Highlights of 2023

The year was busy, eventful, and full of happy moments. Here’s some of our achievements for the year:

• Settled and moved into our new home.
• Went on our first overseas trip since 2019.
• Mrs Money King NZ increased her investment contributions from $150 to $200 per week.
• Mr Money King NZ revamped and rebalanced his index fund portfolio.
• Switched to Squirrel’s On-Call account to store our short-term savings.
• Published 27 new Money King NZ articles.

However, we’re ending the year feeling physically and mentally tired, and we’re sure many are in the same position and are glad to be saying farewell to 2023. With our busy lives it’s becoming challenging for us to create new content for Money King NZ, but our goal for 2024 is to keep going with sharing New Zealand investing news, reviews, and education with you all. Thanks for reading and your ongoing support!

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Disclaimer

The content of this article is based on Money King NZ’s opinion and should not be considered financial advice. The information should never be used without first assessing your own personal and financial situation, and conducting your own research. You may wish to consult with an authorised financial adviser before making any investment decisions.