Bears back bonds in jittery markets/Monthly market analysis from TOWER Investments: August 2010

Default KiwiSaver provider TOWER Investments has released its monthly analysis of market performances for August, 2010.

“Bears backed bonds over August as fear returned to stalk the markets,” said Sam Stubbs, Chief Executive Officer of TOWER Investments.

“Bonds were the place to be, both locally and internationally, while equities took a pounding,” he said.

“Disappointing economic statistics concerning US gross domestic product (GDP) and unemployment levels contributed to concerns that recovery in advanced economies has stalled, with the possible risk of deflation coming,” he said.

“In that sort of bearish climate investors poured funds into advanced economy governments bonds as their insurance policy, driving down bond yields to further lows,” he said.

“For example, yields on US 10-year Treasury bonds were squeezed down to around 2.5%, while yields on their German equivalents were thrust even lower to about 2%,” he said.

“Results for risky assets like shares and commodities were negative over August, with exceptions being precious metals like gold and silver that were snapped up by anxious buyers,” he said.

“Good news for investors in the New Zealand sharemarket was that it did relatively better than international equities as measured in local currencies, even if it lost some ground,” he said.

“Reporting season results announced in August carried some positives for New Zealand listed companies, including successful cost cutting and balance sheet restructuring,” he said.

“The acid test for our economy will be reports due in for retailing stocks, which are likely to show further falls in domestic consumption as Kiwis keep their purses and wallets closed,” he said.

Asset Class League Tables – Top Three per Time Period to End August 2010*