After a bullish two years, there are signs that sharemarkets are headed for choppier waters. Reweti Kohere chats to Stake CEO Matt Leibowitz about what’s in store for investors this year.
People anticipated 2021, “the year of the vaccine”, would see countries start recovering from stressed healthcare systems, unprecedented restrictions on citizens’ freedoms and immobilised global supply chains.
But then came delta, and now omicron. The variants have tested patience and crushed optimism. Uncertainty is perhaps one of the few certainties we have – that and the importance of getting your booster shot.
For sharemarkets, the global pandemic has largely been a boon, and most continued their bullish streaks last year. The S&P500, the benchmark US index made up of 500 large publicly traded companies, rose more than a quarter in 2021 while the Dow Jones and Nasdaq posted double-digit returns. Closer to home, the Australian sharemarket gained 13%. By contrast, New Zealand recorded its first down year in a decade – the local NZX50 index fell nearly 4% in 2021, attributed mostly to the Reserve Bank’s tightening of monetary support to curb rising inflation. When the latest inflation data is released on Thursday, the already high cost of goods and services (nearly at 5% for the three months to September 2021) is expected by economists to exceed 6% for the December quarter.
While overseas markets may have finished the year upbeat, they have started 2022 where New Zealand left off – down. The three major US indices are falling for the third consecutive week, with the S&P500 and Nasdaq having tumbled 10% from their most recent highs. That particular 10% drop, or a “correction” in investing lingo, suggests investors are pointedly more pessimistic as the Federal Reserve gears up to raise interest rates.
“[Last year] was really a year we probably won’t see again,” says Matt Leibowitz, the chief executive and founder of Stake, an investing platform, similar to Sharesies or Hatch, which gives investors access to the US sharemarket.
Leibowitz describes 2021 as a breakout year for financial markets, with Covid spurring increased access to investment opportunities, although the former derivatives trader expects slower growth this year. I spoke with him some more about what’s in store for everyday investors, the shift from investing in property to investing in shares, and which sectors he has his eyes on.
This Q&A has been edited for clarity.
Markets are facing more headwinds this year, including further interest rate hikes and rising inflation. What can investors expect for the next 12 months?
It’s important to realise the markets go up, down and sideways – they don’t always go up. We had a real big pullback when Covid started rearing its head in early 2020 and then we’ve seen the bull market of the last two years continue. You’re starting to see a lot of value come out of some of the stocks that have really run away over that time – Zoom, [US exercise equipment and media company] Peloton, even some of the buy now, pay later [companies] in Australia and New Zealand. All of those growth-oriented stocks that were priced for protection with Covid have started to come off pretty quick. That’s always a sign that things are overheated and turning the other way.
New consumer credit laws are emerging as another barrier to New Zealanders purchasing their first home, and sharemarkets have benefited from their redirected funds. Where do you see that shift from property to stocks headed in 2022?
Stake users like having the ability to get into stock markets or financial markets without all the usual hassles of the property market. You don’t have to line up during the week or weekends to visit a house, you don’t have to speak with a lawyer about contracts and you don’t have to deal with real estate agents. Stock markets are far more accessible than they have ever been before. That shift is real but people will naturally have both, even when they do enter the property market. They’re not all of a sudden going to sell their shares. They’re going to use that to learn their craft, understand how markets and money management work. That, in turn, will continue.
What sectors do you have your eyes on?
I’m always cautious because I’ve seen, since I started investing, the tech crash [of the early 2000s], which is interesting because the excitement in the market the last two years seems similar to the end of the tech run. But still, I think in 2000, value stocks [stocks that trade at lower prices than their financial performance and fundamentals might suggest they’re worth] actually went up during that time so you may see something similar play out [there]. There’ll be moves away from the Covid-related stocks. For humans to have been programmed for seven billion years, I don’t think two years is going to mean we change the way we live. Yes, there has been a shift but I don’t think it’s material to the way we’re going to live our lives three, four or five years from now. You’re not going to have a Peloton bike in every single living room around the country. That’s not going to be the case. So really understand what you’re investing in and do the research like you would with any other investment.
Disclaimer: the information is of a general nature and is not intended as personalised financial advice. Readers should obtain professional advice before making investment decisions.
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