Is it still safe to ride the stock market rollercoaster?
More downs than ups mean investors face a wild ride for the foreseeable future. So what's the best move?
Welcome to Stocktake – it’s June 28: Kia ora! Thanks to everyone who came back for issue two. “You tricked me into reading about business” is how one reader described this newsletter’s vibe, and I really dig that. That’s what I’m going for! Last week’s topic, nationwide staff shortages, sparked plenty of feedback. One told the story of their son who had three job offers after recently switching careers in hospitality. But Harminder Singh, an associate professor at AUT, gently suggested robotics could do away with many of those roles. “I believe automation and process redesign will make a world of difference,” he said. Do we need more robots? One West Auckland restaurant is already doing this. There might be more. If you’ve found a different solution for your staffing shortage, please get in touch. I’d love to hear from you.
- Chris Schulz, business editor
‘There’s no sign that the volatility’s going to slow down’
Warning: the following newsletter includes graphs…
My Sharesies account hasn’t been looking that healthy lately. I’ve been investing with the local stock market platform for the past couple of years, along with both of my kids, who have separate accounts. We each get $5 a week to play with. I mostly invest in climate-friendly funds, while my daughter puts all her money into Disney, and my son switches between Ferrari and Tesla. Invest in what you know – isn’t that the saying?
Lately, the returns I’m used to getting on the very small amounts we’ve invested have diminished. Last week, they disappeared, and for the first time, my profits became losses. That’s because riding the stock market has become an extremely volatile rollercoaster. You might have heard the phrase “bear market” being used. Bitcoin and NFTs have crashed. If you keep a close eye on your Kiwisaver account, you’ve probably seen this playing out across your balance sheet. Try not to look, says one expert.
Here’s a graph (told you!) showing just one terrifying recent week on the US500…
I wouldn’t want to ride any rollercoaster that looks like that, but the reasons for all those dips and dives are obvious. The war in Ukraine is playing its part. There are supply chain issues. Business costs are rising, and so’s the cost of living, including some very expensive blocks of cheese showing up on supermarket shelves. Then there are interest rates, which keep going up. Shit is bleak out there.
The stock market can, and often does, reflect what’s going on in the world. As a reasonably new investor, that can be scary. Should I cut my losses and put all my money under a mattress? Erm, no. To help calm my nerves, I called Gus Watson, Sharesies’ head of new investment and funds. He told me to chill. The company gets questions like this every day, and they do as much as they can to educate their 570,000 investors. “Know your goals,” he told me, calmly and patiently. “Know why you’re investing, and be in it for the long term.”
The long term. That’s the key. Markets always dip and dive. Anyone who’s been investing for a while knows this. “If you need to get your money out sooner than a 10- or 20-year timeline, adjust your investment strategy to some of those less risky investments,” says Watson. No one can predict the future, and Watson didn’t even bother trying when I asked him how long these dips might last. In fact, he kind of chuckled. “I wish I could tell you that,” he said.
But perhaps another graph will help ease your nerves. Here’s the US500 over the past 50 years. Note the two big dips in 2008, and again in 2020.
I asked Watson how Sharesies investors had responded to recent falls. I thought many might be bailing, but his answer surprised me. “We’re not seeing any cooling coming through,” he said. People are staying put, and riding it out. They have diversified portfolios, many are like me and invest small amounts often, and they understand that rises and falls are just part of riding this particular rollercoaster.
Perhaps, 15 years on from the start of Kiwisaver, and six since the start of Sharesies, we’re finally becoming an investment-savvy nation. Which is a good thing. Because, as Watson also told me: “There’s no sign that the volatility’s going to slow down in the short term.”
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The headlines you need to know about…
Bad news, first-home buyers. It’s the worst time to buy a house in 65 years. Stuff’s report on the new Infometrics survey includes this quote from chief forecaster Gareth Kiernan: “… Today’s first-home buyers face much less favourable financial outcomes than a buyer in 1987 did with interest rates of 20%.” Yikes.
I thought cybersecurity was the kind of thing you only learned about once you needed to find a free virus checker for your new PC. But Massey University associate professor Julian Jang-Jaccard is campaigning for programs to be taught in schools. As she points out, everything from baby monitors to fridges are connected to wifi these days.
It’s the place to get a pie and a Powerade at 3am. But a recent press release from government minister David Clark revealed lasagne topper titans Night ‘n Day had somehow become the third biggest grocery supplier in Aotearoa. How’d that happen? I tried to find out.
It’s all anyone’s talking about in the garden city – another costly blowout for the Christchurch stadium, which will cost $683 million to rebuild and is still years away from being finished. Here’s a complete and fascinating timeline of the omnishambles, written by James Dann.
It’s been a big week for the food industry. If you have fond memories of Le Snaks in your school lunches, treasure them - they’ve been discontinued. Same, apparently, with Ernest Adams and its iconic range of slices. Sriracha sauce could soon be hard to find. But let’s end on some good news: a $4 food truck has launched in Dunedin, and Whittaker’s is apparently on the cusp of launching an oat milk chocolate. Yum!
Anyone who enjoyed last week’s post about staff shortages will enjoy the latest episode of When the Facts Change. “The world of employment is quite different this year,” AUT professor Jarrod Harr tells host Bernard Hickey on the topic of the great resignation of 2022. “It does encourage people to be a little more adventurous.” Find out how to get your next pay rise here.
Speaking of podcasts, I’ve been enjoying Hot Money, a series from the Financial Times that tries to find out who controls the world’s online porn industry, then accidentally unravels the history of the internet along the way. It’s a fascinating deep dive into the early days of the internet, full of wild characters rocking fake names and some really good journalism.
The incredible impact of the pandemic on TV audiences
Across two carefully constructed stories, Duncan Greive has been tracking the rise and fall of television, the medium that used to unite us all, but now seems to be falling out of favour. Here’s the first piece, which shows just how fast broadcast TV is being replaced by all kinds of things, like Netflix, YouTube and social media. The second, released today, shows TV’s brief resurgence during the pandemic. “The 1pm briefings were life-and-death viewing, but also reminded me of watching X Factor in 2015, when it felt like everyone was on Twitter and watching TV at the same time,” writes Greive. Warning: these pieces contain graphs, but they’re fascinating viewing that showed just how closely we were all watching those briefings during lockdowns.
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Finally, here’s something we’ve been toying with…
Do you hate the annoying yet necessary task of budgeting? If so, then Pennies may change your mind. The Apple-only app trades detail and depth for speed and simplicity – no bells, no whistles, you simply set up a budget amount, record your expenses upfront or as you go and keep up-to-date of the remainder. Pennies is an intuitive app that doesn’t pretend to be something it’s not – and a reminder that controlling your spending is in your hands. (getpennies.com) / Reweti Kohere
That’s all from Stocktake this week. See you next Tuesday!