The End Of The Bull Run

Trade wars, sagging business confidence, an end to rising house prices. Is this just the end of the boom or is the next crash on the way?

- Paul McBeth

For most of the decade since the socalled global financial crisis, both the world economy and the New Zealand economy have been growing.

The focus of much political debate during that period was about worsening income inequalities and the blow-out in housing affordability. But investors have had a great 10 years, both here and internationally.

Wall Street’s bull run has been so entrenched that the occasional correction – July’s US$100 billion ($148 billion) tumble in the value of Facebook stock, for example – automatically attracts a round of speculation that the boom is finally over.

In New Zealand, the last sharemarket bust was in 2007, ending a six-year run during which the benchmark stock-market measure – the S&P/NZX 50 index – rose 153% before falling off a cliff with the rest of the world in the financial crisis. That wiped 44% from the value of the local market, hitting rock bottom in March 2009.

Since then, however, the market has soared 269%, and stripping out the financial-crisis slump, is still up 106%, beating even the 93% increase in Auckland property values over the same period.

But in recent months, the shine has been coming off. With US President Donald Trump flirting with destabilising trade wars, signs the Chinese economy is much weaker than its pumped-up official statistics suggest, and a slump in business confidence in New Zealand from the third-highest in the OECD two years ago to second-lowest, caused, in part, by a new Government, the question is increasingly being put: are we heading into an economic downturn?