Mark Lister offers explanation to Craigs clients.
Craigs Investment Partners drew a stellar crowd to its recent state of the nation address at Trustpower Bay Venues, with some 850 RSVPs.
According to the keynote speaker Mark Lister, head of private wealth research, he does some 40-odd presentations a year across New Zealand, including areas where Craigs IP doesn’t have branches, but does still have a strong client base.
The sessions are pitched at Craig IP’s investment clients, but Lister spoke with Bay of Plenty Business News on the record before the event began.
The sessions are designed to give the firm’s clients an insight into how the company thinks markets are tracking, as well as offering insights into the housing and stock markets, and of course currency developments.
Lister said that there was a feeling amongst many people, especially in the business community, that there wasn’t as much business or real world experience in the current Labour government as some voters would have liked.
“You have got quite a lot of career politicians, which is a little bit risky when they haven’t really had to run a real business,” Lister said.
Having said that, Lister noted he met regularly with prime minister Jacinda Ardern and finance minister Grant Robertson, and regarded them as very moderate.
“They’re not the government of transformational change,” he said. “They’re very similar on the political spectrum to the [previous National] Key government and there’s not a lot of rocking the boat.”
Lister said that while plenty of National supporters might have been disappointed by the election, it appeared the Ardern government would be in for some time, based on its current popularity.
Basically the Craigs IP events are an opportunity to explain to clients the reasoning behind their investment strategies.
“From an investment perspective, politics is important because it sets the scene for the economy, but the economy is a beast of its own,” Lister said.
“Businesses will do what they do and politicians are only one small part of the scene. So you never build your investment strategy around the political environment.”
Housing a key issue
A key issue for many New Zealanders remains housing, which is continuing to rise.
“I think it will continue to steadily drift higher, although I think from here the pace of gains will slow down. The market has had a big runup in the last 12 months, but there are changes, partly because of the changes you are seeing on the policy front, which are reducing the attractiveness of property as an investment for many people.”
Lister said that at the coal face advisers were seeing a lot of property investors getting out of the market because it was becoming harder work.
Lister noted that the biggest thing driver of property prices was interest rates.
“The reason property prices have done what they’ve done over the last 30 years is that interest rates have been going steadily lower,” he said.
“Your view on what the property market will do is largely a function of where you think interest rates will go from here,” he said.
“If you think interest rates will stay at current levels for the next five years, property will keep going up. If you are nervous about interest rates and you think we’ve reached a bottom in interest rates, then I would say that’s a head wind to the property market.”
He noted that in the 1970s and 1980s inflation averaged about 12 per cent per annum whereas in recent years in it had averaged about two percent, meaning rates were much lower.
“That is why people in financial markets are watching inflation really closely, because history has told us that a rise in inflation is usually a precursor to a rise in interest rates.”