On Point Craigs Investment Partners

This week will be an eventful one in the US, with the June Federal Reserve meeting on Tuesday and Wednesday as well as the May consumer price index report. In the UK we'll get monthly GDP and some fresh labour market indicators ahead of the Bank of England meeting next week, while the Bank of Japan will release its latest monetary policy decision on Friday. It'll be a holiday-shortened week across the Tasman, and the highlights will be the NAB business survey (Tuesday) and the labour force report (Thursday), both covering the month of May. The Queensland Budget is also out this week, which will include a debt issuance update that will interest financial markets. There'll be plenty to keep an eye on locally too, with the ANZ truckometer, migration, electronic card transactions and selected price indices for May. The latest monthly Real Estate Institute housing market report is also out this week.

We have a lot of clients from farming backgrounds, either past or present. They’re great people, and many have spent decades overcoming a plethora of challenges to build very successful businesses. When the time comes to think beyond the farm, investing in a portfolio dominated by shares, listed property, private equity and fixed income doesn’t always come naturally. Having less control and influence is a mental hurdle for some, while diversifying far and wide can also be a new concept. However, farmers that can get their head around these differences often become very astute investors. As we gear up for Fieldays this year, let me share a few reasons why.

Global politics are in the spotlight this week, with a presidential election in Mexico, elections for the European parliament to be held on June 6-9, and India's six-week long national election in its final phase. In the US, all eyes will be on Friday's jobs report in the lead up to next week’s Federal Reserve meeting, while the latest ISM indices will also be in focus. In Europe, the key event will be the European Central Bank's monetary policy decision on Thursday, where we might see the first rate cut of this cycle. Across the Tasman, the highlight will be gross domestic product (GDP) for the March 2024 quarter, while it is a holiday-shortened week here in New Zealand.

The Reserve Bank left the Official Cash Rate unchanged last week, and it's forecast track suggests there will be no respite for borrowers until next year, even though the economy is slowing more than expected, unemployment is rising more quickly and inflation has fallen to the lowest level in three years. The headline consumer price index increased at an annual rate of four per cent in the 12 months to the end of March, and the Reserve Bank expects it to end the year at 2.9 per cent. However, this encouraging outlook is tempered by the fact that most of the decline has been driven by falling international (or tradables) prices. In contrast, domestic or non-tradables inflation, is still too high to provide any relief. What is causing this high domestic inflation, and what needs to happen for it to fall?

Inflation indicators across some of the major regions will be in focus this week, with PCE inflation due in the US, as well as preliminary measures in Europe and the Tokyo CPI in Japan. Locally, Budget 2024 will take centre stage on Thursday afternoon, and we'll also get some fresh business confidence figures for May. There's plenty happening on the corporate front too, as the reporting season heats up on the NZX. This week we'll see the latest earnings releases from the likes of Ryman Healthcare, Serko, Fisher & Paykel Healthcare and Mainfreight. Fonterra is scheduled to provide a business update, which should include an opening milk price forecast for the upcoming 2024/25 season.

There are many sayings in the investment world, and one that always comes up at this time of year is “sell in May and go away”. The adage emerged in the Northern Hemisphere and it suggests investors should sell their shares in May, relax and enjoy the summer months before returning to the market in the autumn (or spring, here in New Zealand). It's based on a suggestion the six months from November to April typically offers higher returns than the May to October period. There’s some truth in this, if we look at seasonal patterns over the years, so will selling in May be a good move for investors in 2024?