The latest results season has proven better-than-feared – what does this mean for the outlook for NZ stock market?

By Greg Smith, Head of Retail at Devon Funds

It comes after a significant period of market volatility in 2022, during which a significant amount of “bad news” was priced in during the first six months of the year. Markets rebounded in July and through much of August, but investors have been seeking some (localised at least) vindication that this has been justified, and an assessment of how companies are currently placed from a valuation perspective.

The earnings season has been important for a number of other reasons. With many commentators, analysts and economists talking up the prospects of a recession, there has been keen interest on the view from the coalface in terms of how the corporate sector is seeing the landscape. Investors have also been focused on the ability of corporates to protect their margins given still elevated levels of inflation.

There has also been more than a little interest in how companies that have benefitted from benefited from Covid are seeing things as pandemic tailwinds dissipate. On the other side are those companies that have done it tough during the past few years. Here the question of interest is how swift the recovery will be post Covid as the world normalises.

Results have in most cases also been impacted by factors other than Covid. The war in the Ukraine has exacerbated inflationary and supply challenges, while labour shortages have remained prevalent. Extreme weather has also been a factor for some companies. The impact of rising interest rates and softening property markets have also added to the mix. Political tensions, and global international economic concerns, particularly around China, has further muddied the waters, given China’s position as New Zealand’s largest customer.