As the year draws to a close, Pie Funds CEO + Founder Mike Taylor takes a look back at the hottest topics.
1. The rise of Bitcoin
Love it or hate it, cryptocurrency has grown in popularity and while I think it’s easy to dismiss crypto trading as speculation, this phenomenon is not going away. To me though, it has all the hallmarks of a bubble - wild speculation, mass participation, and founded on ground-breaking new technology. My view has not changed on this. Own it, or don’t own it, at your peril.
2. Meme stocks all go
2021 saw the rise of the meme stocks and the Reddit “pump and dump”. Early in the year it started with Gamestop, a business that was effectively broke and heavily shorted. Enter the retail traders, who collectively squeezed the shorts and drove this to the moon. Since then various others have followed, often with the price collapsing as fast as it rallied.
3. Tesla hits US$1 trillion
It’s boom-time for clean energy and electric vehicles. Tesla has blown past US$1t market cap just as it blows past 1% market share. It seems madness that you could buy all the car companies in the world for around US$1.7t, but it is what it is. People love founder Elon Musk, they love Teslas, and they love buying something that keeps going up!
4. Inflation and interest rates increase
Inflation – it’s back! And it knows what you are doing this summer: asking for a pay rise and paying more for, well, everything. You might have noticed an increase in supermarket spend already. The latest inflation reading in NZ was 4.9% and I expect this to print 6-7% early next year. Interest rates are increasing too and therefore so are mortgage rates. After bottoming out at 2% earlier this year, 1-year mortgage rates are up to 3.5% and with the market now forecasting 3% OCR by 2023, that could see the 1-year mortgage rate at 5% in 18 months. Yikes. This means you could pay more on your mortgage but, on the flip side, term deposit rates will likely increase too.
5. Ongoing business disruptions
The global Covid-19 pandemic is still having a wide impact on people’s health and businesses in New Zealand and across the globe. Supply chain disruptions are impacting businesses, including those we invest in. Secondly, the surge in Covid-19 cases linked to the Delta variant has caused a lot of factory and port shutdowns in Asia, again leaving companies short of products ranging from clothing to furniture. You’ve probably noticed this already if you’ve tried to buy anything made abroad lately - household appliances, building materials, furnishings...the list goes on.
It has been a really big year and we expect Covid-related issues to continue for businesses into next year. Hopefully New Zealand has seen the last of its Level 4 lockdowns for the meantime, and we look forward to local businesses picking up steam again.
Information is current as at November 2021. View the Product Disclosure Statement plus our duties and complaints process, at www.piefunds.co.nz. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a reliable indicator of future returns.