KiwiSaver Monthly Update March 2022

KiwiSaver Monthly Update for the month ending 28 February 2022

What's the latest?
JUNO Growth Fund Portfolio Manager Mark Devcich gives the latest on markets this month.

February is typically a busy month of the year as Australian companies report their half-year results, and we have quarterly updates from our international companies. 

This year there was a common thematic of rising costs, supply chain disruption, wage inflation and lack of staff. I believe these trends will be transitory as supply chains normalise, Covid isolation rules relax and borders reopen, but there is likely to be a structural element of higher inflation due to less reliance on cross-border trade for key resources and a move away from just in time supply chains to just in case. The saying goes, "the cure for higher prices is higher prices". Supply will inevitably increase, and/or demand will decline. We are starting to see this now as rising consumer prices from energy prices and higher mortgage costs pressure the consumer. Demand could stagnate when inventory levels increase, which is an issue for retailers. 

We have continued to see a drawdown in the valuation of technology and high-growth stocks. There now seems to be a focus on companies seeking profitability rather than growth at all costs. However, it is often difficult for a company to make this transition as they have built their infrastructure around growing as fast as possible and are not optimised for profitability. This transition will likely be painful as growth rates will slow for these companies. Their profitability levels will be marginal and will look expensive on traditional profitability metrics. However, companies that don't make the transition to sustainable profitability are likely to need to raise capital in an increasingly tricky capital raising environment. 

The other notable event was the escalation in tensions between Ukraine and Russia, culminating in Russia invading Ukraine in February. A total invasion was not the most likely scenario most people expected; therefore, it has caused equity markets to sell off, especially in Europe. We have also seen the NZD appreciate significantly against the euro and the GBP, which is usually the opposite of what occurs in a time of crisis. 

On this occasion, with NZ on the other side of the world, it is seen as a relative haven and a beneficiary of higher commodity prices. While it is impossible to know what will happen with this war, we all hope it de-escalates, and peace returns quickly. It is also likely the self-implosion of the Russian economy and wealth of the Russian people could lead to an overthrow of Putin as leader of the Russian state, which could be a long-term positive for the region.

We are also now seeing indiscriminate selling on some days in the market. In the rare scenario when quality goes on sale, this is a happy hunting ground for active fund managers that can separate the wheat from the chaff. In these volatile environments we are aiming to improve the quality of the portfolios by buying those companies on our watchlist that were previously out of reach because valuation levels were too high. 

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Global volatility 
CEO + Founder Mike Taylor on uncertainty and volatility. 

As an investment professional I often find it a challenge to talk about “market” events in a desensitised way, particularly where people lose their lives or livelihoods. Here, I am thinking about the GFC, Covid-19 and the war in Ukraine in particular. However, that is precisely what I am asked to do on a regular basis. ‘Yes Mike, I know people are dying, but what about my investment’, is a phrase I hear in my mind, whether investors are actually thinking that or not. Anyway, my point here is, wherever you are and whoever you are, if you’re reading this, you are most definitely far better off than those currently caught in the middle of the conflict. So I ask you to spare a moment to reflect on that, in whatever way you find most appropriate for you.

In the investment world we often talk about uncertainty and volatility and that one is synonymous with the other, when in fact they are quite different because volatility can be present on the upside and the downside. We all think we know the future with certainty, but the reality is – the future is uncertain – always has been, and always will be. Investors and people in general just do a good job of convincing themselves that if they are not worried about the future, then the future is certain. Volatility on the other hand, while clearly linked to investors’ perceptions of uncertainty/certainty, is more aligned to the behaviour of said investors. Therefore, we can say, if investors feel more uncertain, they will act out in a volatile fashion. Conversely if investors feel more certain, generally they will usually not make many adjustments. But, if investors feel very certain, they will once again act out in a volatile fashion. Presently, stating the obvious, investors feel the future is uncertain and therefore, investor behaviour is volatile. But in many ways the market still remains rational, because it is simply responding to new information as it comes to hand. 

Crazy things in the investment world 
In this new section we delve into crazy things that are happening in the investment world.

1) The Russian currency, the rouble, is now worth just over 1 New Zealand cent at the time of writing. It has lost 30% of its value against the US dollar since the start of the year.

2) Two years ago oil was worthless. US$0 during the first outbreak of Covid – nobody was driving, we had too much oil. Now it’s worth over US$115 and we don’t have enough.

Information correct as at 28 February 2022. Pie Funds Management Limited is the issuer and manager of the JUNO KiwiSaver Scheme. Click here for our Product Disclosure Statement. Any advice is given by Pie Funds Management Limited, and is general only. It 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 if you act on any advice. As manager of the Scheme we receive monthly fees that are determined by your balance and whether you are 13 years or over. We will benefit financially if you invest in our products. We manage any conflicts of interest via an internal compliance framework designed to ensure we meet our duties to you. For information about the advice we can provide, our duties and complaint process and how disputes can be resolved, visit All content is correct at time of publication date, unless otherwise indicated. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary. Please let us know if you would like a hard copy of this disclosure information.