If you buy a share or exchange traded fund (ETF) listed outside New Zealand, it’s not just changes in the share price that will determine your return. You also need to keep an eye on the exchange rate between the New Zealand dollar and the currency in question. While currency moves don’t have a significant bearing on long-term returns and at times they can help reduce volatility, over shorter periods they can have quite a big impact. Many local investors are happy to take on some currency risk, and the best way to think about this is to consider it an insurance policy against our small, vulnerable economy. However, if that worries you or if you dislike the idea of something else to try and predict, there are ways to mitigate the impact of potential changes. Holding a portion of your wealth outside our shores is crucial for New Zealand investors, and we shouldn’t let the prospect of currency movements dissuade us from taking opportunities in other markets.

After an April sell-off saw the US market fall 5.5% from its all time, the S&P 500 rebounded 2.7% last week, its best performance in almost six months. This came despite another hotter than expected inflation report, with the headline PCE (the Fed's preferred inflation gauge) increasing at an annual rate of 2.7%. Solid earnings releases drove the gains, and with 46% of the market having reported 80% of companies have beaten expectations. Most other sharemarkets followed suit, with the FTSE 100 in the UK rising 3.1% to a fresh highs and emerging market shares gaining 3.7%. This coming week is a very busy one, with some major US economic releases due as well as a Federal Reserve meeting. There's plenty happening locally too, with the ANZ Business Outlook survey for April due on Tuesday and the labour force report for the March 2024 quarter out on Wednesday. The unemployment rate is expected to rise from 4.0% to 4.3%, the highest in three years and well above multi-decade low of 3.2% from early 2022. Last but not least, there will be more international earnings releases to monitor across the world, with 175 S&P 500 companies scheduled to announce results.

Markets were volatile last week, with another stronger than expected inflation report in the US rattling investors and pushing out hope for interest rate cuts. Wednesday's release of our own consumer price index for the March 2024 quarter will be the key event here in New Zealand, with markets hopeful this will be fall further and open the door to Official Cash Rate cuts later in the year. Elsewhere, Federal Reserve speakers will be closely watched to see recent developments have changed their view, while the quarterly international reporting season heats up. More than 40 S&P 500 companies scheduled to announce results in the days ahead, with some of the highlights likely to be Bank of America, Johnson & Johnson, UnitedHeatlh, ASML, LVMH, Netflix, TSMC and Procter & Gamble.

Several sharemarkets hit new highs during the first few months of this year, but the most significant milestone of all came in Japan, where the Nikkei 225 index finally retook the level it reached 34 years ago in 1989. After a stellar performance in 2023 which saw the Nikkei surge 28.2 per cent, even outpacing the mighty S&P 500, Japanese shares rose another 20.6 per cent in the first three months of this year and stormed through those previous highs. The rally hasn’t been because of a weaker yen and massive stimulus alone. We’ve seen a notable increase in governance standards, while valuations also look reasonable even after the gains of the past 18 months. Perhaps most importantly of all, Japan is finding its way back onto the radar of investors. After being ignored for decades, these recent positive developments might see Japanese shares increasingly included in portfolios as a diversification opportunity following big moves in US shares.

The highlight of the coming week will be the consumer price index report in the US, after two months of stronger-than-expected figures. The odds of a June rate cut from the Fed have fallen from almost 90% to about 50/50 in recent weeks. The European Central Bank will release a monetary policy decision on Thursday and while no change is expected, markets will be looking for clues that a rate cut is imminent. In contrast to the US, recent inflation readings in Europe have come in below forecasts. The local highlight will be the monetary policy decision from the Reserve Bank of New Zealand on Wednesday afternoon. No change is expected, but the tone and language will be closely monitored. Last but not least, the first quarter international reporting season beings and we’ll hear from some of the US financial heavyweights first up. Blackrock, Citigroup, JPMorgan and Wells Fargo are all announcing earnings on Friday in what is shaping up as a pivotal earnings season for the high-flying US market.

This year has started very strongly for share investors, with returns in the March quarter much better than many would’ve expected. World shares rose 7.8 per cent and as was the case in 2023, the US and Japan led the charge. New Zealand assets lagged, with the NZX 50 sharemarket index rising 2.8 per cent and corporate bonds posting a marginal gain. As was the case in 2023, well-diversified investors with a global mindset have been handsomely rewarded. Central banks will remain a focal point in the months ahead, with interest rate cuts on the horizon but the timing difficult to pick. Another important test for financial markets could be the US corporate reporting season, which starts next week, with the bar higher on the back of recent share price gains.

It'll be another holiday-shortened week, with markets closed on Monday in New Zealand, Australia and the UK (while the US market will open as normal on Monday). The highlight will be the March jobs report in the US, while the latest ISM indices are also due (on Monday and Wednesday). If the flash PMIs for the same period are anything to go by, we might see an improvement across the manufacturing sector this month. Federal Reserve Chair Jerome Powell will be giving a speech at Stanford on Wednesday, with expectations for a June rate cut still sitting at around 70%. Last week Powell noted said "we can be careful about this decision with the labour market and economy strong", noting that "we don't need to be in a hurry to cut", so this speech will be closely monitored for further comments. Here in New Zealand, with the results of another dairy auction and the latest building permits the only releases of note. Markets are looking ahead to next week's Reserve Bank of New Zealand decision, with an Official Cash Rate cut in August now fully priced.

If you hold some of your investments in a trust, your tax rate is going up next week. You might need to rethink the types of assets you own and the investment vehicles you choose, to ensure you’re not paying more tax than you need to. But beware, the impost might not be the showstopper some are suggesting it will be, and it doesn’t always make sense to build an investment strategy around tax minimisation. Fine-tuning could be the order of the day, rather than a dramatic recalibration of your approach. Whether you’ve got a trust or not, it’s an opportune time take a closer look at how your affairs are structured, just don’t let tax considerations alone drive your investment decisions.

It was a very strong week for sharemarkets in most regions, with confidence interest rate cuts are just around the corner growing and financial markets responding positively. The Swiss National Bank cut its policy interest rate on Thursday, becoming the first central bank with a G10 currency to do so. This followed the Federal Reserve's unchanged guidance for three rate cuts in 2024 (despite some stronger inflation figures of late), and the first Bank of England decision since 2021 where no members voted for a hike. Financial markets now expect the easing cycle to start in the US, UK and Europe in June, and for Australia and New Zealand to both follow in August. The final week of the March quarter will be a holiday-shortened one, with many of the major markets closed for Good Friday. US inflation will be in focus again, with the February PCE index (the Fed's preferred inflation gauge) due on Friday. In New Zealand, the latest ANZ Business Outlook is due, while we'll also get the Budget Policy Statement, ahead of the May Budget.

Short-term deposits are offering great value to investors right now, but don’t get content. Within the next six months interest rates could start falling, and after the first cut they’re likely to keep going lower. If that happens, investors will be facing much less attractive reinvestment rates and a declining income stream. Rather than waiting for the herd to catch on, savvy investors should take advantage of this opportunity and make hay while the sun is still shining.