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Chapter 1: What key economic topics are covered in this episode?
On Point with Craig's Investment Partners. The information provided here is general in nature and it's not financial advice. It doesn't take into account your situation, objectives, goals or risk tolerance. All investments are subject to risks and none are guaranteed. Before you make any investment decisions, we recommend you contact an investment advisor.
For more information about our services or to view the Craig's Investment Partners Financial Advice Provider Disclosure Statement, please visit our website, which is craigsip.com. Welcome to On Point.
I'm Mark Lister, Investment Director at Craig's Investment Partners, and I'll be talking about a range of topics including economics, portfolio strategy, investor education, and anything else that's happening out there in financial markets.
Morning team, hope you're all well. Hope you're feeling better than me actually. I'm a little bit under the weather at the moment, so excuse my voice. I'll try and smash through this as quickly as possible, then I'll go and have a sleep. Looking at share markets last week, the S&P 500 index in the US rose for a sixth week in a row. It was up another 2.3%.
That came on the back of more strong earnings releases and hopes for a resolution in the Middle East. That sees the S&P 500 up 16.6% from the lows of late March, and it is 6% above its pre-conflict peak. Other markets were generally solid, a bit of a mixed bag out there, but one that is worth noting is emerging market shares. Emerging market shares continue to outperform.
They were up 6.9% last week. So the US market, the S&P 500, is up 8.1% year to date, but emerging markets are up 22%, almost 21.9% to be precise. So EM has been the place to be. The local NZX50 had its second consecutive weekly gain. It was up 1%. That came on the back of an 18% rise in Infratool, which is one of our biggest stocks. Interest rates were little changed.
The New Zealand five-year swap rate finished the week just below 4%, which is pretty much where it started the week. And odds for the next OCR hike haven't changed a lot too from a week earlier. There is a Reserve Bank meeting at the end of this month, at the end of May. Right now, markets see a 30% chance of a hike. So possible, but no change seen as much more likely.
Look ahead to the next meeting, which is in July, though, and markets see a hike from the Reserve Bank as fully priced. And when you look at the whole calendar year, 2026, markets are pricing 85 basis points of tightening of increases in the OCR. So they usually move in 25 basis point increments. 25 basis points is 0.25%.
So if the market's thinking 85, that means the market sees three 25 basis point hikes and a good chance or a half a chance of a fourth 25 basis point hike. So the market sees the OCR finishing this year at either 3% or maybe 3.25%. Right, looking back at some of the key releases and events, we had one big central bank meeting. This was across the Tasman.
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Chapter 2: How did the S&P 500 perform last week?
against its Australian counterpart, then I would suggest that is a big part of the reason why. What do they do next? Well, who knows? Your guess is as good as mine. Some people out there do think they might have to move a little bit further and increase rates even more.
But it was interesting to hear the governor of the RBA, Michelle Bullock, in the press conference say that after three consecutive hikes, that's given the board space to see how the conflict plays out and how it impacts the Australian economy. So that The way I would read that is that she's maybe saying, well, we can pause now and just see what happens.
So maybe that is the end of the hikes across the Tasman. We'll just have to wait and see. Here in New Zealand, we got the results of another dairy auction. Dairy prices broke their losing streak. The Global Dairy Trade Index rose by 1.5%. That was driven by a strong showing from all products. Butter and cheese, the only two that fell. So the headline index now up about 20% this year.
Fonterra expecting a power of $9.70 that's their midpoint that would make for the second highest of all time so the dairy sector is still in pretty good shape. Unemployment this was the key release here in New Zealand and the unemployment rate did fall unexpectedly but I think the worst is yet to come so it's sort of the calm before the storm.
The unemployment rate in the December quarter was 5.4% It came down a little bit to 5.3 in contrast to forecast for it to remain unchanged, so that was good. However, the details of the report were a little bit softer.
Employment rose by a little bit less than expected, and the participation rate slipped back a little bit, and that is probably why you saw the headline unemployment rate come back, because participation fell slightly. Wage trends still pretty subdued, so that was good as well from a Reserve Bank perspective.
But I think the issue here is that unemployment is probably going to push a little bit higher. At the start of the year, I would have said this is as bad as it gets and unemployment will be falling all through 2026. But because of the Middle East conflict, the fuel price shock, the threat of more OCR hikes and what that does for activity and confidence and sentiment,
there's a decent chance that unemployment pushes higher before peaking and then coming down. And I saw some forecasts from ANZ, I think it was, late last week. They've now got the unemployment rate pushing up to 5.8%, which would be quite a bit higher than where we are today at 5.3%.
in the united states there's a couple of things to watch we got the ism services index we got the jobs report both of them pretty good the ism service is steady at 53.6 so only marginally lower than march levels new orders down a little bit but remained healthy the prices paid index was unchanged so it's still high but at least it didn't get any worse then you had the jobs report on friday that was better than expected 115 000 new jobs created
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