Welcome to your January update
Dear investor, welcome to the SBS Wealth Investment Funds Investor Update for January 2024. Below you will find the latest performance data and market commentary from your SBS Wealth Investment Management Team.
Performance data
Performance as at 31 December 2024.
| Strategy | 1M | 3M | 6M |
| High Growth Strategy |
0.45% |
6.52% |
9.80% |
| Growth Strategy |
0.32% |
5.17% |
8.48% |
| Balanced Strategy |
0.19% |
3.82% |
7.14% |
| Conservative Strategy |
-0.03% |
1.78% |
5.13% |
| Portfolio | 1M | 1Y | 5Y pa |
| World Equity Portfolio |
0.68% |
25.45% |
11.44% |
| Australasian Equity Portfolio |
-0.23% |
10.82% |
3.51% |
| World Bond Portfolio |
-0.63% |
2.87% |
-0.04% |
| New Zealand Bond Portfolio* |
0.48% |
6.48% |
1.20% |
* Previously Corporate Bond Portfolio
Performance is shown after fees and before tax. For more information about how performance is calculated and more performance periods, click here.
Market update
December was a relatively gentle reminder that markets climb a wall of worry but at the end of day, it is how we deal with this that counts. The month was shaped with challenging mixed economic data, sector specific trends and geopolitical developments. US equities faced intermittent headwinds from rising treasury yields (impacting negatively on the value of bonds as well), with the US 10-year yield hitting 4.6%, raising concerns over borrowing costs and the impact on equity valuations. However, this is all things we have heard before during 2023, so is not overly alarming.
The World Equity Portfolio managed a small gain despite the noise in the wider market. This was predominantly driven by currency valuations, where a weak NZ dollar fell 5.3% versus the US dollar (a positive for US held shares). This meant negative valuations from several US equities was mostly offset by the currency conversion when reported back in NZD.
Diving deeper into the World Equity Portfolio, the standout direct holdings for the month were Tesla +23.5% (continued the momentum from last month’s Republican presidential win), Toyota +20.7%, Alphabet (Google) +18.4%, and Sony, Amazon & Apple all +11.4% respectively. Companies that lost some value due to recent market news were Novo Nordisk, United Health Group and Mercury.
Sector performance diverged with Consumer Discretionary stocks the standout performer, driven by resilient holiday spending and optimism in retail. On the other end, the Materials sector declined significantly amid weaker commodity prices and subdued demand from key global markets.
Geopolitical developments, including discussions on US-China trade relations and evolving fiscal policies added to the challenges of the month, as market participants continued to focus on the possible impacts of the Trump presidency and Republican control of the Senate and House.
Closer to home, the Australasian Equity Portfolio returned –0.23%. Performance of the Australian share market was lacklustre given weaker commodity prices and reduced demand for Materials. Transurban was the standout at +7.5% for the month, while the small cap stocks and Financial Services stocks disappointed. The New Zealand sharemarket however, was a mixed bag with infrastructure stocks like Auckland International Airport +12.1%, Contact Energy +5.6%, and Port of Tauranga +4.7% taking top positions for the month, while Mercury fell –11.6% and Meridian –4.8%.
The performance of the World Bond Portfolio was impacted by rising treasury yields in the international component (and falling bond values) particularly in the US. This was partially offset by some shorter duration bonds.
The New Zealand Bond Portfolio avoided the increasing yields in longer dated bonds, providing a positive return. The Portfolio benefited from holding about half of its assets in corporate debt, as returns from corporate bonds were higher than NZ Government bonds in December.
Strategies with higher weightings to the equity portfolios performed better than those with a higher weight to the bond portfolios.
Overall, 2024 was a great year for equities, particularly large cap US technology stocks (Nvidia, Apple, Microsoft), the US Communication Services sector (Meta and Alphabet), Consumer Discretionary sector (Tesla and Amazon) and Financials (JP Morgan). The US sharemarket returned 23% for the year, (34% when converted to NZD). In fact, over half of this return came from the Magnificent 7. Closer to home the NZ sharemarket was up 11% and the Australian sharemarket 14%. Fixed interest markets had their second consecutive positive year, with NZ fixed interest outperforming global fixed interest.
The outlook for 2025 appears positive despite the unpredictability of Trump’s presidency. So far, Trump’s emphasis on onshoring of US manufacturing and tariffs, as well as geopolitical tensions dominate the narrative of markets. Yet the US economy remains strong and looks set to continue driving growth in 2025. Domestically, there are still many hurdles to overcome economically.