Market Update September 2022

The global share market fell in September, to wipe out the gains from recent months, and return shares to bear market territory (down more than 20%). The declines were again in reaction to persistently high inflation, and a commitment from central banks to aggressively raise interest rates. The challenging economic environment, and the possibility of a recession, has also led to companies and analysts downgrading earnings expectations for the year ahead. During the month, global shares were down -9% (in US dollars), and NZ shares were down -4.6%. Bonds, both domestic and international, also delivered a negative return in reaction to rising interest rates.

One bright spot for local investors was the fall of the NZ dollar, which helped offset the fall in global shares. At month-end the NZ dollar was trading at $0.57 against the US dollar, a level not seen since the depths of the Global Financial Crisis in 2008. In NZ dollar terms global shares were down less than 2%.

The events of this year have left a lot of investors understandably nervous and sitting on the sidelines. “Be greedy when others are fearful” is perhaps the most well-known, and frequently referenced, quote from famed invested Warren Buffet. The quote alludes to the fact that the best time to invest can often be when markets are down, and other investors are headed for the exit. The table below shows the performance of the US share market after a decline of 25% or more, and clearly shows that buying when the markets have fallen has been a consistently successful strategy.