In an interview yesterday, Mr Lister said a recession was "absolutely possible, if not likely" but it would not necessarily be like the global financial crisis.
"Recession just means you can get big ones and mild [ones]. I suspect the recession we are likely to have will feel more like a slow-down than recession," he said.
The pain had not been felt yet — there would be a delayed effect — particularly as there was a "fair whack" of fixed mortgages coming up for renewal this year and mortgage holders moving from a 4% to 6% rate.
But that did not mean mortgagee sales, rather there would be some "serious belt tightening" which would flow through to consumer spending. A fair part of that was already in the price, he said.
What needed to be remembered was that there were two different time frames; the financial market was running 12 to 18 months ahead of the economy. The New Zealand sharemarket peaked in January 2021 and had been drifting lower since then.
"The sharemarket looks ahead and knows this is coming. By the time you’re in the recession, that’s when the market is starting to come out of the recession," he said.
The housing market, to a degree, was doing that as well. Having peaked in November 2021, it had already been falling for the past year and a-half.
Mr Lister joined Craigs in 2004 as an equity analyst before leading the private wealth research team from 2007 until 2022 focusing on portfolio strategy. He is speaking at the company’s State of the Nation presentation at the Otago Business School later today.
It was a fascinating time to be involved in the financial sector, just like it was during the GFC.
"Life’s tough, people are nervous, the housing market is sliding away, the sharemarket is up and down.
"I don’t think we’re anywhere near the GFC; that was a really scary time. We’ll look back on this as a really fascinating one people will write their thesis on," he said.
It was also the time when investors looked to investment advisers for assistance.
"Times like this, they need our help rather than the easy times when every man and his dog can be a star investor," he said.
Asked his advice for investors, Mr Lister said it might sound like "a bit of a cop-out answer" but it all depended on what they were trying to achieve. That needed to be ascertained first along with what their investment time horizon was.
If they were thinking about their retirement plan, 10 or 20 years — or more — away, then they did not really need to change tack, based on what was being seen in the market.
"Keep calm and keep doing what you know will work."
And it was a good time to buy when prices were low; whether that was property or shares — it could be lucrative times for long-term investment, with bargains to be snapped up. There were the usual rules around buying good-quality assets, being well diversified and taking opportunities where you saw them.
Where it got murkier was people with shorter time horizons; if they needed to call on their money, such as a big ticket item coming up in the next six months, then they did not want to be taking risks. They were better to "play it safe" and keep their money in conservative assets which were giving attractive returns at the moment.
Leaving it in the bank was low risk — "luckily our banks are much safer than the ones we’re hearing about overseas" — and while the rise in interest rates was bad for those with mortgages who were facing higher borrowing costs, it was a silver lining for savers who had lots of opportunities, not just in the bank but with the likes of corporate bonds.
"Those things are giving much higher rates of return than we’ve seen in more than a decade. There’s always an opportunity somewhere, that’s the thing with finance or markets," he said.
So where to from here? Mr Lister expected interest rates probably had a little bit further to go, house prices still probably had to fall a bit and there was still a bumpy road ahead for the sharemarket. But there were some good opportunities if investors were willing to look through the 12 to 18-month view and look further ahead, he said.
People tended to look at what their money was doing more closely during a tough economic period and New Zealand had not seen inflation like this for 30 years.
The Covid-19 global pandemic had also opened up a new generation of investors to thinking more broadly about investment. The "Kiwi way" had traditionally been buying a rental or two, and putting money in a term deposit.
People were now more open about buying businesses — owning shares was about owning a portion of a business — and platforms like Sharesies had pushed investing in the market more into the mainstream.
Those in their 30s and under were also much more open-minded about buying shares in overseas companies like Microsoft and Amazon, whereas the typical New Zealand investor had historically been very risk averse.
"[For] younger people and younger clients, that’s just normal. They don’t see the borders as a limitation, they’re familiar with those big name companies and want to own those businesses. It’s fantastic people are thinking outside the box," he said.
