Sharemarkets have been volatile this week as the impact of US President Donald Trump’s on-again-off-again tariff war was felt.
The Vix volatility index, which measures fear in the market, is up 60% this month.
But commentators say, despite the upheaval, there are still investment opportunities worth considering.
An investment adviser at Hamilton Hindin Greene, Jeremy Sullivan, said market conditions were evolving. As well as tariffs, falling interest rates were changing the picture.
He said there were some key trends to note. High-growth tech and speculative stocks were potentially overvalued at the moment, he said.
“We’ve seen strong performance in certain technology and growth stocks, some of which are trading at elevated valuations relative to earnings.”
Nvidia has been in the spotlight – its share price lifted more than 170% in 2024.
But it has been a casualty more recently, as investors started to worry about the outlook.
Sullivan said it still had potential, though. “Nvidia has dipped a bit, but most analysts still see room for growth. With its strong position in AI and data centres, many believe it has solid long-term potential despite the recent pullback.
“The market trades on three things, fear, greed and fundamentals. Tariffs have investors a touch nervous at the moment even with Nvidia putting down some solid numbers.”
Kōura Wealth founder Rupert Carlyon said whether Nvidia was good value would depend on how it performed from here.
“It come back a very long way since over the past few months, falling 23% in the past three months.
“Is it overpriced? I honestly don’t know. The truth is if they hit their growth targets, and continue to do what they expect … they are currently priced at a valuation of 24 times one-year forward PE, though this quickly falls to 19 times by January 2027. This compares to the broader market which trades at 21.1 times.
“If they continue to be the technology winners in this space, Nvidia will look cheap, if they are caught by someone in China it will look expensive.”
Sullivan said areas that could still be undervalued were those that were sensitive to interest rates, such as property and infrastructure.
“As borrowing costs decline, listed property trusts (REITs), infrastructure firms, and companies with high debt loads may see renewed investor interest. Lower interest rates could also stimulate housing activity, benefiting related sectors.”
He said consumer and retail stocks could also improve as mortgage rates dropped and shoppers had more discretionary money to spend.
But he said New Zealand companies that were reliant on US exports could face increased costs although a weaker New Zealand dollar could help offset that.
Devon Funds Management head of retail Greg Smith said Fisher and Paykel Healthcare was likely to be the company on the NZX most at risk of a hit from the tariffs, because of its Mexico manufacturing. “The worst-case outcome has not been priced in [for Fisher & Paykel Healthcare].”
But he said there was plenty of value for investors on the NZX.
Electricity gentailers Contact and Meridian’s share prices are down 7% and 8% in the year to date, but stood to benefit as deposit rates dropped and investors looked for higher yielding dividend investments, he said.
Spark could be a “turnaround play”, he said, although it might not happen immediately.
Other companies closely tied to the economic cycle could have a better result next reporting season, he said, Fletcher Building and Freightways.
“Fletcher Building has talked about how rate cuts are feeding through to activity.”
rnz.co.nz
