December 4, 2024 • 4 mins
It hasn't been a great year for the NZX, but one expert believes things are in place for a better 2025.
The reduced interest rates could lead to a better outlook for investors going forward, according to new reports.
Milford Asset Management's Sam Trethewey explains further.
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Speaker 1 (00:00):
Let's talk about the n z X and I'm joined
by Sam Trathui and he's from Milford Asset Management.
Speaker 2 (00:05):
Hell it's Sam Evening Andrew.
Speaker 1 (00:08):
So the market, the INS and X has been a
material underperformer, particularly when you're compared to major off sure
share markets this year.
Speaker 2 (00:16):
Why I think, Look, Firstly, it's still up ten percent
over the course of the year, which is not a
bad yees and it's definitely what I call respectable, but
agree like, it's not the twenty five thirty percent that
we are seeing in major offshore share markets, the likes
of the S and P five hundred, et cetera. So
why hasn't kept up Really three key reasons. So firstly,
(00:38):
interest rates. The first half of this year, the stance
taken by the rbn ZS was a really big head
win to the local market. It's pretty sensitive to tentist rates,
the dividing yields, et cetera. The attractives and attractiveness of
them as a big driver of performance. And it wasn't
untill that first cut that we saw from the RBNZ
in July that that pressure is. Secondly, corporate earnings have
(01:01):
been under pressure. That's what we all can see and
feel in the economy coming through and heading the market.
And then finally, if you look closely at the performance
of those major year markets offshore at the return, it's
really been driven by a handful of stocks. So take
the US for example, the Magnificent seven there led by
Navidio on the artificial official intelligence theme. That stock is
(01:24):
up one and eighty percent this year, so it's a
big part of the market. The inxt X does have
some winners Frish and Buckle Health get the largest stock
up sixty percent this year, but not to the same extent.
So three key differences there.
Speaker 1 (01:36):
Andrew, Okay, so what about the year ahead.
Speaker 2 (01:40):
I think, look, the headline really is that I'm probably
more optimistic about the outlook for the inxet X that
we than I have been some time, and that's really
since the pandemic. So where interistrates are heading, the official
cash rate towards three percents, and the prospect of improving
economic conditions in the year and then therefore improving corporate
(02:02):
earnings really are the big drivers there. If you look
back at history pre the pandemic, when we're last cutting
interest rates back and from say twenty fifteen to twenty twenty.
Back then we had the rockstar economy, but we also
had a rockstar share market, and that's when we saw
some pretty persistent, steady flow into the market looking for
better returns. Most of that was term deposits. So it
(02:24):
will be interesting to see as ten rates system deposit
rates come down, will that drive the share market higher
like it has in the past.
Speaker 1 (02:32):
Well, we always said, you know, survive until twenty five,
but these days are saying, well, twenty five is still
going to be a grind. Let's get to twenty six.
Would you agree with that?
Speaker 2 (02:41):
I think, well, the test is and what we're not
seeing yet is if the interest rate cuts that are
coming through from the Reserve Bank when they do, actually
start to start to influence the local economy. And that's
what we really need to see, and I think people
are hopeful of it at the stage. But twenty six
to point certainly looks a lot easier and a lot
(03:02):
better set up than twenty five.
Speaker 1 (03:04):
And does the nz X does do you Zealand need
a hero stock like in the video? And before we
go too much about in video, so the SMP says
that AAI might be being a little bit over hyped
in America, but still there's a hero stock there. Do
we really need one of those to make our markets perform?
Speaker 2 (03:19):
I think it. Look it certainly was the biggest story,
the biggest thematic of twenty twenty four, and I expect
that to evolve in the video to the aartmatic in Nvidia,
to evolve into the next test stage over the yearhead
So maybe it's into software companies that benefit from that
AI tech to new point around how long it can last.
But locally we have had these stocks before. At Milk
(03:42):
for instance, dominated the market a while ago, and you know,
sure it does help performance, but I think the biggest
drivers that interest rate setup and where the economic conditions
he had, So certainly if they do improve, it is
a very good prospect for your head.
Speaker 1 (04:00):
Thank you so much, Merry Christmas. Sam tra theory from
Milford's Essets Management.
Speaker 2 (04:05):
For more from Hither Duplessy Allen Drive, listen live to
news talks. It'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
Let's talk about the n z X and I'm joined
by Sam Trathui and he's from Milford Asset Management.
Speaker 2 (00:05):
Hell it's Sam Evening Andrew.
Speaker 1 (00:08):
So the market, the INS and X has been a
material underperformer, particularly when you're compared to major off sure
share markets this year.
Speaker 2 (00:16):
Why I think, Look, Firstly, it's still up ten percent
over the course of the year, which is not a
bad yees and it's definitely what I call respectable, but
agree like, it's not the twenty five thirty percent that
we are seeing in major offshore share markets, the likes
of the S and P five hundred, et cetera. So
why hasn't kept up Really three key reasons. So firstly,
(00:38):
interest rates. The first half of this year, the stance
taken by the rbn ZS was a really big head
win to the local market. It's pretty sensitive to tentist rates,
the dividing yields, et cetera. The attractives and attractiveness of
them as a big driver of performance. And it wasn't
untill that first cut that we saw from the RBNZ
in July that that pressure is. Secondly, corporate earnings have
(01:01):
been under pressure. That's what we all can see and
feel in the economy coming through and heading the market.
And then finally, if you look closely at the performance
of those major year markets offshore at the return, it's
really been driven by a handful of stocks. So take
the US for example, the Magnificent seven there led by
Navidio on the artificial official intelligence theme. That stock is
(01:24):
up one and eighty percent this year, so it's a
big part of the market. The inxt X does have
some winners Frish and Buckle Health get the largest stock
up sixty percent this year, but not to the same extent.
So three key differences there.
Speaker 1 (01:36):
Andrew, Okay, so what about the year ahead.
Speaker 2 (01:40):
I think, look, the headline really is that I'm probably
more optimistic about the outlook for the inxet X that
we than I have been some time, and that's really
since the pandemic. So where interistrates are heading, the official
cash rate towards three percents, and the prospect of improving
economic conditions in the year and then therefore improving corporate
(02:02):
earnings really are the big drivers there. If you look
back at history pre the pandemic, when we're last cutting
interest rates back and from say twenty fifteen to twenty twenty.
Back then we had the rockstar economy, but we also
had a rockstar share market, and that's when we saw
some pretty persistent, steady flow into the market looking for
better returns. Most of that was term deposits. So it
(02:24):
will be interesting to see as ten rates system deposit
rates come down, will that drive the share market higher
like it has in the past.
Speaker 1 (02:32):
Well, we always said, you know, survive until twenty five,
but these days are saying, well, twenty five is still
going to be a grind. Let's get to twenty six.
Would you agree with that?
Speaker 2 (02:41):
I think, well, the test is and what we're not
seeing yet is if the interest rate cuts that are
coming through from the Reserve Bank when they do, actually
start to start to influence the local economy. And that's
what we really need to see, and I think people
are hopeful of it at the stage. But twenty six
to point certainly looks a lot easier and a lot
(03:02):
better set up than twenty five.
Speaker 1 (03:04):
And does the nz X does do you Zealand need
a hero stock like in the video? And before we
go too much about in video, so the SMP says
that AAI might be being a little bit over hyped
in America, but still there's a hero stock there. Do
we really need one of those to make our markets perform?
Speaker 2 (03:19):
I think it. Look it certainly was the biggest story,
the biggest thematic of twenty twenty four, and I expect
that to evolve in the video to the aartmatic in Nvidia,
to evolve into the next test stage over the yearhead
So maybe it's into software companies that benefit from that
AI tech to new point around how long it can last.
But locally we have had these stocks before. At Milk
(03:42):
for instance, dominated the market a while ago, and you know,
sure it does help performance, but I think the biggest
drivers that interest rate setup and where the economic conditions
he had, So certainly if they do improve, it is
a very good prospect for your head.
Speaker 1 (04:00):
Thank you so much, Merry Christmas. Sam tra theory from
Milford's Essets Management.
Speaker 2 (04:05):
For more from Hither Duplessy Allen Drive, listen live to
news talks. It'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
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