Quarterly Market Comment

For the quarter ended 31 October 2025

• Global equity markets continued to perform well, with the MSCI World Index gaining +8.0% over the past three months. A weaker local currency provided a tailwind, with a return of +11.4% when measured in New Zealand dollars.
• Over the past year, the MSCI World Index has gained +22.0%, again with stronger results in NZD terms of +26.8%.
• Performance across global markets has generally been positive, although to varying degrees across different regions, with the US up +8.2%, Australia up +2.7%, and New Zealand +5.7%.
• Fixed income returns were positive, though more modest. New Zealand investment–grade corporate bonds rose +2.8% for the quarter, bringing 12-month returns to +7.4%.

A healthy quarter for global markets

Global equity markets have continued to deliver strong gains over the past three months. In the US, shares have continued to gain, supported by solid company profits, with earnings guidance for the next few months improving. The Federal Reserve’s recent rate cut is also seen as reducing the risk of a sharper economic slowdown. European markets have risen too, helped by fading trade-war worries, a firmer economic backdrop, and hopes of more government spending.

Looking at US markets in particular, a small group of very large AI-related companies has led markets. That’s fine while they keep delivering, but it leaves markets vulnerable if profits miss or if businesses slow their spending on AI projects. That’s why diversification—spreading investments across different sectors—remains important.

Interest rates have further to fall as New Zealand economy remains sluggish

New Zealand’s economy struggled over the first half of 2025. The economy shrunk ‑0.9% over the June quarter, underscoring a weak domestic backdrop. However, more timely indicators suggest that conditions are beginning to improve as we move towards 2026.

New Zealand GDP growth and GDP growth per capita (% yoy)

There are already pockets of strength emerging across the economy. Agriculture and horticulture are performing well, supported by firm global commodity prices. Fonterra delivered a record NZ$10.16 per kilogram of milk solids for the 2024/25 season, with another payout exceeding NZ$10 likely for the current season. Farmers are expected to use some of this additional income initially to reduce debt. Yet, with another strong year anticipated—and a windfall from the sale of Fonterra’s consumer business—more of this cash is likely to flow through rural communities. Tourism also continues to recover, with international arrivals now around 90% of pre-COVID levels. While the rebound has been slower than in some other countries, the steady increase is helping to underpin regional economies.

By contrast, the picture in Auckland and Wellington has been more downbeat. Weaker construction activity, softer housing markets, and subdued consumer sentiment have kept growth on the back foot. The housing market is particularly impactful—with falling prices tending to sap confidence and suppress spending.

Against this backdrop, interest rates have continued to fall, with the Reserve Bank cutting the Official Cash Rate (OCR) by 50bp at its latest meeting in October, and another 25bp rate cut expected in November. Borrowing costs for mortgages and business loans are easing further, offering some welcome relief to households and companies facing higher repayment burdens.

At the same time, lower rates are impacting savers. Returns on cash and term deposits may fall further, prompting some to reassess whether their money is still working hard enough. With interest rates shifting, now could be a good time to review where your savings are parked—and whether other options might offer a better balance between risk and return.

Australasian reporting seasons mixed

New Zealand’s August reporting season showed ongoing challenges for many companies. Results were uneven, with continued revenue pressure, margin compression, and cyclical weakness. On a brighter note, a number of firms reported that rising costs are moderating and that customer demand is beginning to stabilise. Despite the challenging macro backdrop and mixed reporting season, the S&P/NZX 50 Index has gained +5.7% over the most recent quarter, as confidence builds that the worst is behind us. There is increasing appeal in NZ’s defensive profile of high-quality, dividend-paying companies, particularly as interest rates continue to fall, which is starting to positively impact local stocks. 

Australia’s latest reporting season told a similar story of mixed performance across industries, and we have seen solid, albeit comparatively more muted, returns on the ASX 200 this quarter of 2.7%.

Don’t chase the hype

Over the past year, your investment portfolio has likely featured both standout performers and underwhelming laggards—that’s entirely expected. The very purpose of diversification is to ensure that different investments excel under different conditions.

It can be tempting to chase the sectors dominating the headlines, but FOMO (‘fear of missing out’) is rarely a sound investment strategy. By the time a theme has become front-page news, much of the easy money has usually been made and it now may even be overhyped.

Instead, stay focused on your own goals, time horizon, and risk tolerance. A diversified, disciplined approach—reviewed occasionally, not constantly—has historically worked better than chasing short-term hype. Remember: past performance is no guarantee of future results.

Matt Henry
Head of Wealth Management Research

Zoe Wallis
Investment Strategist 

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