Plain Sailing, Italian Shoal Ahead
Equities have had a tailwind for the past few months. Both NZ and global shares have risen around 6% since the beginning
of November. For New Zealand, this continues a stellar run – rising 28% over the past year. Investors in the post-GFC
world have been trained to be suspicious of rallies. Over the past few years, a run like this could quickly evaporate on
the next “crisis” – be it Greece, Italy, Spain or US Politics. We still see this sort of event risk as relevant in 2013,
more on this below. But otherwise we remain pleased with what we have seen in recent months. In particular, economic
news flow has been encouraging. At the headline level, the Goldman Sachs Global Leading Indicator, a catch-all of
economic news from around the world, has been rising and is now modestly positive. That alone explains a good deal of
the rebound in equities versus bonds, as the chart below illustrates.
ENDS