End of year (March 2025) Market Commentary
This week our members would have received their annual statements for the year ending 31st March 2025.
Our summary:
Geopolitical tensions, threats of tariffs, and tech advancements created uncertainty for investors globally. This even weakened investments usually considered more ‘low risk’ like NZ government bonds. However, SuperEasy results were generally pleasing despite these challenges, especially for members with a conservative or balanced portfolios. Our Automatic Fund showed its value by providing protection for our older members.
Remember, market conditions can change rapidly so having a long-term approach to investments and a diversified portfolio can assist in building long term wealth. In this instance, the last couple of months dulled an otherwise great year, and markets have recovered well since the reporting date.
What the experts said:
Investment returns for the 12 months to March were reasonable (reasonably) relative to an increasingly challenging geopolitical and macro-economic backdrop.
The year was volatile for global financial markets, marked by unpredictable economic policies, geopolitical tensions, and technological advancements. The global share market index (MSCI World) finished up 7.0% for the year ending March 2025. This is significantly less than the previous year’s share market returns of 26.2%, reflecting challenges in the U.S. equity market, particularly for large-cap growth stocks but still a positive result and not significantly below the long-term average annual return.
The ‘Magnificent 7’ tech giants, (Alphabet (Google), Amazon, Apple, Meta Platforms (Facebook), Microsoft, NVIDIA, and Tesla) despite their dominance, saw their growth gaps narrow as investor sentiment shifted from optimism to caution, influenced by Trump’s proposed tariff policies and pending rate cuts. Amid overall market volatility, the transformation drive by artificial intelligence (AI) has been a significant trend, with companies leveraging AI to enhance productivity and operational efficiency, shifting investor preferences towards firms at the forefront of technological innovation.
Locally, a weak domestic economy continued to hold back returns for New Zealand growth assets. While some fund returns were below their 5-year average, these were within reasonable expectations given the challenging backdrop. In what may be a transition year for global economies, fund diversification across asset classes and across investments within asset classes played an important part in generating fund returns.
New Zealand (NZ) fixed income assets (S&P/NZX Composite Investment Grade Bond Index) returned circa 4% for the 12-month period, after the Reserve Bank of New Zealand signalled a move lower in the Official Cash Rate (OCR) over the second half of 2025 as inflation continues to fall.
The New Zealand share market (S&P/NZX 50 Gross Index) finished the year up circa 1%. After steadily tracking higher in the first the three quarters the NZ share market fell circa -6.4% in the first quarter of 2025 driven lower by tariff related concerns, disappointing earnings downgrades from several larger capitalisation companies, and several new equity capital raisings. New Zealand real estate shares delivered a negative return over the year but delivered a better return than other growth assets over the first quarter of 2025 as commercial property fundamentals stabilised and falling interest rates provided valuation support.
It is important to remember that this volatility is part of the normal market cycle and reiterates the value of riding out dramatic swings by staying invested for the long term.
Brought to you by Mercer, Harbour Asset Management and the SuperEasy team.
Regards,
Charlie Howe
