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Harbour Investment Horizon: Fiscal Policy Outlook

There is growing coverage in the media that a slowing economy could force a fiscal tightening to stay within the government’s fiscal responsibility rules.
There is little evidence that the market is concerned with this risk, with the New Zealand government bond yields trading below the US for the first time in 25 years.
While providing important political discipline, there is also some flex in the fiscal responsibility rules, ...

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Christian Hawkesby | Posted on Aug 17, 2018
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Harbour Navigator: Regime Change at the RBNZ

The path of least regret for the RBNZ appears to be letting core inflation rise above 2%.
A broad interpretation of the mandate motivates actions to support growth and business confidence.
As the new regime beds down there may be more volatility in the rates and FX market, with a new voting committee still yet to come in 2019.
In last week’s Monetary Policy Statement (MPS), the RBNZ surprised markets by shifting the projected ...

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Harbour Team | Posted on Aug 14, 2018
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Harbour Outlook: Slowing growth and rising inflation

Key developments

In recent months, we have highlighted how the New Zealand economy and markets seem at a crossroads, with a moderation in domestic economic activity whilst cost pressures appear to be rising. With further evidence of this scenario playing out in July, we look into the implications for the rates market through monetary and fiscal policy, as well as the impact on New Zealand equity valuations.

But first, looki...

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Harbour Team | Posted on Aug 7, 2018
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Harbour Navigator: Deflationary risks in New Zealand abating

A key theme for the New Zealand economy in 2018 has been the potential crossroads facing the economic outlook. For the past 5 years, we have seen strong economic activity and low inflation keeping interest rates low and asset prices high. However, looking forward there are signs that economic activity is moderating at the same time as inflation pressures are emerging.

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Christian Hawkesby | Posted on Aug 1, 2018
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Tariff Wars

A muted global market reaction so far?

With no further escalation, the implications for New Zealand from the current US-China tariff war are likely to be limited. Any escalation, however, will have a significant impact on global growth, company earnings, the stock market and the general appetite for risk. Already, some sectors may be more impacted via supply chain disruption, competitive pricing changes and the economic spill...

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Andrew Bascand | Posted on Jul 24, 2018
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Harbour Outlook - Activity moderating and costs rising

Key developments

In recent months we have highlighted how economies and markets seem at a crossroads. In June, there was further evidence of an upcoming moderation in domestic economic activity whilst cost pressures appear to be rising. Looking forward, this is a theme that remains near the top of our list of what to watch most closely on the horizon.

Looking back over June, while some macroeconomic data in Europe and Asia ...

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Harbour Team | Posted on Jul 9, 2018
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Investment Horizon: Interest Rate Cycles - Endings and Beginnings

As expected by the market, the US Federal Reserve lifted the US Fed Funds Rate this week to 1.75%-2.00%.  This was the second hike in 2018 and a continuation in a cycle that began in late 2015.  In a post-GFC environment where interest rates are eventually expected to settle at lower levels, it’s natural to ask how far away the US Federal Reserve is to the end of its interest rate cycle.  At the same time, in New Zealand, the ...

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Harbour Team | Posted on Jun 14, 2018
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Harbour Outlook: Crossroads

A common theme which came through during May was economies and markets being at crossroads.  Globally, the US continued to generate solid economic data, while in Europe political tensions rose.  Domestically, solid economic activity masked a growing divergence by type of activity.  Equally, subdued near-term inflation pressures concealed the prospect of an uplift in some medium-term inflation drivers.

Bond yields fell over the month.  Economic data in the US is continuing to print at very robust levels and markets are placing an 80% chance on the US Federal Reserve delivering another hike at their upcoming June meeting.  However, this was more than offset during May by a flight to safety prompted by the failure of leading Italian political parties to form a government, heightened by the very high level of Italian Government debt and concerns that the Italians may wish to redefine aspects of their Eurozone membership.  While Italian 2-year yields initially spiked as the market priced an additional risk premium, yields in other developed markets like the US, Australia and NZ fell given their relative safety...

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Harbour Team | Posted on Jun 11, 2018
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Harbour Outlook: Moving into the political season

The Harbour Outlook summarises recent market developments, what we are monitoring closely, and our key views on the outlook for fixed interest, credit and equity markets.

Key developments

Globally, equity markets bounced back in April, with concerns abating from earlier in the year on global inflation risks, trade wars, political threats to the tech sector, and funding pressures. In particular, global markets were comforted...

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Harbour Staff | Posted on May 9, 2018
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The state of Infant Milk Formula in China

Harbour Senior Research Analyst Oyvinn Rimer recently took a trip to China, to investigate the state of the Chinese consumer milk market.
Disclosure: Harbour owns a2 Milk in a number of portfolios.

Having regularly visited China for a decade now, it never ceases to amaze me the sheer scale and speed of their development. Despite frequent visits, there are always noticeable changes to the land and cityscapes.

Two weeks ago, ...

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Oyvinn Rimer | Posted on May 9, 2018