Booster Client Update - NZ has a King/Queenmaker: How does this affect portfolios?
NZ has a King/Queenmaker: How does this affect portfolios?
As many predicted, the provisional results of the election see Winston Peters assume the role of king (or queen) maker. It’s hard to tell exactly what he’s after in his negotiations (we’ve lost count of the number of “bottom lines” he has). He also poses nine different scenarios on how the new Government could look, so to make any investment decision based on this level of uncertainty would be akin to a form of gambling. In saying that, looking back at past elections can help indicate whether this uncertainty is likely to have any market impact.
Looking back, the New Zealand dollar can go through a bit of volatility over periods of uncertainty but the New Zealand share market generally isn’t too affected by the outcome. Usually it stays on the pre-election path, and this is how it appears to be playing out (it’s risen 4% over the last three months). Individual industries can be affected though, depending on the policies. For example, last election, the LabourGreens policy of establishing a single buyer of electricity saw the share prices for electricity generator companies fall heading into the election.
This time round, National have pledged $5b to infrastructure, including road and other transport-related projects, which should benefit construction companies. Labour has a heavy focus on housing affordability, which would likely affect companies sensitive to house prices (e.g. the retirement village operators).
So, what about NZ First? As mentioned, Winston has a number of “bottom lines”, ranging from reducing immigration and restricting foreign freehold land purchases, to creating a state asset buy-back programme. It’s hard to tell what National and Labour may need to agree to in order to form a majority government.
Nonetheless, we remain confident in how your portfolio is positioned, and will watch with interest as the situation unfolds. The outcome may bring some new, exciting opportunities.
The magic of the managed fund
Let’s talk about shares for a minute. No matter how you invest, there are really just two ways to make money from owning shares:
1. You receive a slice of the profits (called dividends), or
2. You sell your shares to someone else for more than you paid (that’s capital gain).
That’s it. Anything else is simply a different way of packaging those two outcomes.
What is Life Insurance?
Life insurance is one of those things that many people know they should probably have but they’re not quite sure what it does, how it works, or whether it’s actually relevant to them. This article breaks it down in clear, everyday terms to help you understand the basics before you decide if it’s something worth exploring further.