Search
  • Robert MacCulloch

Why have Kiwi stocks been rising so strongly on the back of so much bad news?

The NZX 50 has risen 35% since 23 March of this year (from 8,499 to 11,471 today). What is the explanation? DownToEarth Kiwi has done some research and believes there are three possible reasons:


First, government intervention appears to have played a major role. It's too much of a coincidence that the NZX 50 bull run began on 23 March, the very day that our Minister of Finance announced that all businesses, contractors and self-employed people became eligible for the Government's COVID-19 wage subsidies package.


Second, psychology is at play. The Nobel Laureate, Robert Shiller, is arguing that "stories of smaller but still significant stock-market collapses and strong recoveries, a couple of them from 2018, were widely recalled. Talk of regrets about not buying at the bottom then, or in 2009, may have left the impression that the market had fallen enough in 2020. At that point, a fear of missing out took hold, reinforcing investors’ belief that it was safe to go back in".


Third, a view may have started forming these past several months that the virus, whilst wreaking all kinds of havoc, is not going to be quite as bad for the economy as first feared.