Analysing Q1 2024: Investment Market Performance in Australia and New Zealand

As we navigate the financial landscape, staying informed about the performance of investment markets is essential for sound decision-making. The first quarter of 2024 (1 January to 31 March) brought both challenges and opportunities to investors in Australia and New Zealand. In this article, we delve into the quarterly performance of investment markets in these regions, shedding light on key trends and factors that shaped the outcomes.

Australian Investment Market Overview

During the first quarter of 2024, the Australian investment landscape exhibited a positive picture, influenced by a combination of global and domestic factors:  

• Share market: Australian shares rose sharply over the quarter. The S&P/ASX 200 Index, representing the top 200 companies on the Australian Securities Exchange (ASX), was up 5.33% on the back of a respectable earnings reporting season for first half of FY24. Despite this strong return, it continued to lag global share markets which were up over 10% in the quarter, driven primarily by the US.
• Housing market: The Australian housing market as measured by CoreLogic's national Home Value Index (HVI) continued to reach new record highs, rising 1.6% in the first quarter of 2024, after rising 1.4% in the Dec 2023 quarter. While prices fell -7.5% between April 2022 and January 2023, the national HVI has increased 10.2% surpassing its previous high in November 2023.
• Interest rates and monetary policy: The Reserve Bank of Australia (RBA) maintained the target cash rate at 4.35% over the quarter. The RBA’s highest priority is to get inflation to return to its 2-3% target on a sustainable basis within a reasonable timeframe and although there are signs that inflation is easing, it remains high.
• Australian dollar: The Australian dollar fell sharply versus the US dollar, falling over 4% during the quarter from 0.68c to 0.65c. This bodes well for Australian exports as well as Australian listed company sales with USD based revenue.

New Zealand Investment Market Highlights

The investment market and economy in New Zealand faced a similar backdrop to the Australian market during the first quarter of 2024:

• Shares market: The NZX 50 Index, which tracks the performance of the top 50 companies listed on the New Zealand Stock Exchange, was up over the quarter, rising 2.84% in New Zealand Dollar terms. Despite notching a positive return, this was a relatively subdued outcome, given global share markets rose sharply over the quarter.
• Housing market: The New Zealand housing market as measured by the QV House Price Index showed that the average home value increased by 2.2% over the first quarter of 2024. Although the average home value is now 1.9% higher than the same time last year it remains 13.1% below the market's peak in late 2021.
• Monetary policy and interest rates: The Reserve Bank of New Zealand (RBNZ) made no changes to the official cash rate, leaving it at 5.5%. The RBNZ did note that headline inflation remains above their 1-3% target, limiting their ability to tolerate upside inflation surprises.

Global factors impacting both markets.

Both the Australian and New Zealand investment markets were also influenced by global developments during the first quarter:

• Inflation and Central Bank policy: Globally there have been mixed outcomes when it comes to inflation and central bank monetary policy. For example, the Swiss National Bank cut rates in March, the first developed market bank to do so, whereas the Bank of Japan increased its interest rates for the first time in 17 years. The US’s Federal Reserve signalled that while inflation has eased substantially and that the labour market remains strong despite high interest rates, inflation is still too high.
• US Shares. The US share market as measured by the S&P500 index, rose 10.4% during the quarter and is up almost 30% over the last year. Despite this impressive return, the returns have primarily come from a handful of very large IT stocks, nick named the Magnificent Seven.  The seven include Microsoft, Apple, Google, Amazon, Nvidia, Facebook and Tesla.  
• Chinese Growth: China is Australia and New Zealand’s largest trading partner. Although China’s economy continues to grow at a fast pace of around 5%, the current slowdown from its historical levels of 7-8% has adversely impacted Australia’s and New Zealand exports. This has also impacted the returns on their respective share markets compared to global peers.

Navigating the landscape

Although interest rates remain high across the world to contain inflation, economic growth for most major markets continues to remain resilient. While inflation has eased, central banks remain wary of cutting interest rates too early, until they are confident that inflation will not only reach their targets but remain at those levels. Investment markets are forward looking, and investors will assess the outlook for economic growth and inflation. For Australian and New Zealand based investments, the local landscape coupled with how the Chinese economy goes will be important factors that impact those returns going forward.

Staying updated on market trends, understanding the drivers of performance and aligning investment strategies with individual goals and risk tolerance are key steps in achieving financial objectives.

It’s important to note that the information provided in this article is for general information purposes only and should not be considered as financial advice. Each individual's financial circumstances are unique, and it is recommended to consult with qualified professionals before making any investment decisions.

Remember, the investment landscape is subject to change and it's essential to consider the most recent and relevant information when making financial decisions.

Sources:

<sub>1. S&P/ASX 200 Index Performance - ASX
2. NZX 50 Index Performance – NZX
3. S&P500 Index Performance - US
4. Reserve Bank of Australia Monetary Policy - RBA
5. Reserve Bank of New Zealand Official Cash Rate - RBNZ
6. Australian House Prices – CoreLogic
7. NZ house Prices – QV House Price Index</sub>