Quarterly Market Comment

For the quarter ended 31 August 2025

• Global equity markets performed strongly over the past three months. The MSCI World Index rose +8.4% in US dollar terms, and +9.7% when measured in New Zealand dollars.
• Over the past year, the MSCI World Index has gained +15.7%, with stronger results again in NZD terms.
• US, Japanese, and Chinese share markets were among the best performers, while Australia and New Zealand also posted solid gains.
• Share markets in Australia were up +8.2% while the New Zealand market also performed strongly, up +7.7%.
• Fixed income returns were positive, though more modest. New Zealand investment–grade corporate bonds rose +2.6% for the quarter, bringing 12-month returns to +6.4%.

Calm returns to market

Markets have settled after volatility in the first half of the year, supported by further central bank interest rate cuts, greater clarity over global trade policy, and generally positive company results. Investors who stayed the course through April’s market turbulence have been rewarded with a strong rebound. This year has reinforced an important lesson: reacting to headlines can often do more harm than good. Volatility is part and parcel of investing, but over time markets tend to recover, and patience is generally rewarded.

Political noise versus fundamentals

At the end of July, the US announced new baseline tariffs on nearly all trading partners—excluding China and Mexico, which remain in negotiations. Countries with a trade deficit to the US, including New Zealand, now face a 15% tariff on exports. Those countries with a trade surplus face a 10% tariff—most notably Australia and the UK.

US S&P 500 stock index and US political events

Source: Refinitiv, Forsyth Barr analysis

In June, Congress passed the ‘One Big Beautiful Bill Act’ (OBBBA), a multi-trillion-dollar package aimed at boosting household spending ahead of the 2026 midterms. While supportive in the short term, it will add significantly to US debt and future borrowing costs.

Despite the political noise, companies’ earnings have remained resilient—especially in technology sectors linked to artificial intelligence, data infrastructure, and semiconductors. These industries have underpinned much of the recent market strength.

Tariffs are starting to put pressure on some companies, but many are finding ways to adapt by cutting costs or changing their supply chains. Looking ahead, solid company earnings and the chance of more US interest rate cuts are helping to support share markets. However, share prices in some areas look high, which makes them more sensitive to changes in investor confidence or unexpected events. While the US economy is holding up well for now, risks remain. High valuations could leave markets more exposed if growth slows or a recession hits.

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 starting to ease and that customer demand is beginning to stabilise.

The Reserve Bank of New Zealand (RBNZ) responded to subdued economic conditions by cutting the cash rate in August and signalling further reductions ahead. Rates are expected to remain supportive for some time. Despite the challenging backdrop, the S&P/NZX 50 Index gained +4.1% for the quarter. There is increasing appeal in NZ’s defensive profile of high-quality, dividend-paying companies, particularly as interest rates continue to fall. 

Australia’s latest reporting season told a similar story of mixed performance across industries. Nonetheless, the S&P/ASX 200 rose +7.0% for the quarter, supported by optimism around further rate cuts from the Reserve Bank of Australia as inflation remains contained and economic data softens.

Long-term focus versus short-term volatility 

The first half of 2025 tested investors’ resolve—from trade war shocks to volatile economic data and geopolitical flare-ups. Periods like these can be unsettling, but it is important to maintain perspective. History shows that sticking to sound investment principles and a clear plan is the best course, especially when markets are volatile. The coming months will no doubt bring new headlines and surprises, but having the patience and mindset to ride out the bumps helps deliver long-term success.

Matt Henry
Head of Wealth Management Research

Zoe Wallis
Investment Strategist 

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