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October 2020 Economic Commentary

A Labour win for the 2020 New Zealand elections was to be expected. Now its time for Labour to focus on a sustainable recovery and tackling the social and environmental issues.

One of the major policies that will be enacted, come April, is an increase in the top tax bracket. There are ways around this which we will discuss in the coming months. Business owners and those with family trusts will be able to avoid the higher tax rates. Investors also will be able to minimise their tax so I am not confident that the Government will get their projected increased tax take.

Our newsletter below contains two main articles. In the investment market review we traverse some of the key talking points in global markets over the last three months. After a tumultuous first six months of the year, it was pleasing that the recent quarter delivered good overall returns without the same degree of price volatility seen earlier in the year.

The second article, titled ‘The markets are not the economy’ examines why - in spite of such widespread and discouraging economic news - both the US and New Zealand share markets are at, or close to, all-time highs. It’s an interesting read and makes the underlying point that share markets represent the best estimate, today, of each company’s entire future earnings, growth and dividends into the future. It’s also explains why bad current news and a strong share market are not necessarily a contradiction.

Click on the image below to download the pdf version:

Lyfords Newsletter 3Q2020