On Point Craigs Investment Partners

Shares have delivered impressive long-term returns. The US is the biggest market in the world, and its long history lends itself well to analysis. Between 1900 and today, US shares have returned 9.8 per cent per annum (including dividends). That means an investor has, on average, doubled their money every 7.4 years. Not bad at all. That’s a recipe for wealth generation, and an excellent way to ensure your capital grows more than inflation (which has been three per cent per annum over that entire period) and your purchasing power is maintained. However, what’s equally interesting is to consider the typical return in any given calendar year. I did that, and the results surprised me.

There's no shortage of things to watch this week, with Wednesday’s Reserve Bank meeting (which is the last of the year) likely to be the main event. Nobody is expecting any change in interest rates, but the updated projections in the accompanying Monetary Policy Statement will be very important. There will be plenty of corporate earnings releases to monitor across the New Zealand market too, including interim results from market heavyweights Fisher & Paykel Healthcare and Ryman Healthcare, both of which are on Wednesday. Markets will also be digesting the news of what our new government looks like, and which policies have survived negotiations.

Should asset sales be a topic up for discussion? We’re carrying higher debt than in the past, while our creaking infrastructure ensures there’d be no shortage of uses for the funds raised. Demand from investors wouldn’t be a problem, as our small sharemarket has limited options to satisfy the steady stream of KiwiSaver money that rolls in each month. The mixed ownership model has been a huge success in New Zealand, providing the best of both worlds to the taxpayer. It’s fostered stronger businesses and broadened the range of options available to local investors, helping keep more of our investment capital within our shores. Forward-thinking politicians would be wise to shelve any misconceptions and embrace these opportunities.

US shares had another very strong week, with the S&P 500 rising 2.2%. The index is up 7.6% in November and on track for its best month in more than a year. The NZX 50 in New Zealand was more subdued, although it still added 0.3% for its third consecutive weekly gain. The local market has rallied 3.9% this month, on track for its best performance since January. Looking ahead, it will be a holiday-shortened week in the US, with markets closed for Thanksgiving on Thursday. There will also be an early close on Black Friday, the day after Thanksgiving and the unofficial start to the Christmas shopping season. The highlight of the global economic calendar will be the flash PMIs for November. Investors will be watching to see if manufacturing rebound continues, and whether the services sector weakens further. There's a bit happening on the corporate front too, with Oceania Healthcare, Goodman Property Trust and My Food Bag all set to announce earnings in New Zealand, while in the US artificial intelligence will be in focus when NVIDIA releases its latest result on Tuesday.

Many principles of investing are considered compulsory, and one of these is the need for diversification. It can mean spreading your capital over different asset classes, such as bonds and fixed income as well as shares and real estate, or ensuring you own a range of companies across multiple regions and sectors. Being diversified protects you from the risk of major losses, just in case something goes wrong with one of your individual investments or holdings. Let's talk about the basics of diversification, how much is too much, and why some investors might advocate for a more concentrated approach.

The key economic release this week will be the October inflation report in the US. Due Tuesday, the headline consumer price index is expected to slow further, although core inflation is forecast to remain stubbornly high. Markets will also be watching US retail sales on Wednesday. Politics will also be in the spotlight, ahead of Friday's deadline for US Congress to avert a government shutdown as well as the APEC economic leaders' week in San Francisco continuing throughout the week. US President Joe Biden and Chinese President Xi Jinping are expected to meet on Wednesday, amidst a deteriorating relationship between the world's two biggest economies. Locally, we'll get the October housing report from the Real Estate Institute, as well as the latest migration figures. Earnings releases will be forthcoming from Napier Port, Serko and Infratil, while Precinct Properties, Contact Energy and a2 Milk will be among those holding annual meetings.