Market update – quarter ended 30 June 2025

Commentary on the June quarter by Russell Investments, FireSuper’s investment manager and consultant.

Global shares

Global share markets made good gains in the June quarter, with the MSCI ACWI Index ‒ Net returning 4.1% in unhedged New Zealand dollar (NZD) terms. Much of the gains were driven by encouraging trade developments; notably US-China trade relations. The relationship between the world’s two largest economies sunk to new lows in April following US President Donald Trump’s ‘Liberation Day’ announcement; the day on which he revealed higher-than-expected ‘reciprocal’ tariffs on over 180 countries and territories, including China. However, the two sides, who for more than a month had exchanged tit-for-tat tariff hikes, came together for talks in Geneva in early May, with officials agreeing to significantly reduce tariffs against one another for 90 days, effective immediately. Washington agreed to lower tariffs on Chinese imports from 145% to 30%, while Beijing said it would reduce levies on US goods from 125% to 10%.

At the country level, the benchmark US S&P 500 Index (10.6%), the tech-heavy NASDAQ Composite (17.7%) and the Dow Jones Industrial Average (5.0%) all recorded strong gains for the quarter. In fact, both the S&P 500 Index and the NASDAQ Composite hit record highs toward the end of the period; the S&P 500 Index also topping the 6,200 mark for the first time. Stocks were also higher in Japan (7.3%¹), the UK (2.1%²), China (1.3%³) and Europe (1.0%⁴).

New Zealand shares

The New Zealand share market underperformed its global counterparts over the period; the local market returning 2.8%⁵. Like its global peers, the New Zealand market benefited from improving trade relations between Washington and Beijing. Stocks also benefited from further domestic rate cuts, with the Reserve Bank of New Zealand (RBNZ) lowering the official cash rate twice over the period.

At the sector level, energy, communication services and real estate recorded the biggest gains for the quarter. Healthcare and utilities also performed well, while materials, consumer discretionary and industrials trailed the broader market.

Global listed property

Global listed property made good gains in the second quarter, returning 2.4%⁶ in hedged NZD terms. Property stocks, like other growth assets, benefited largely from the trade agreement struck between Washington and Beijing. The market was also supported by mostly lower long-term government bond yields. At the regional level, Australia posted the biggest gains, followed by Continental Europe, Asia ex Japan, the UK and Japan. North America recorded positive returns for the quarter; though this disguised mixed country performances, with Canada posting strong gains while the US trailed the broader market. In terms of sectors, US technology-related names and Japanese developers were amongst the best performers, while US residential and industrial stocks were noticeably weaker.

Global listed infrastructure

The global listed infrastructure market performed well over the period, returning 6.5%⁷ in hedged NZD terms. Emerging markets recorded the biggest gains for the quarter, driven by strong returns in Mexico, Brazil and China; the latter benefiting from better-than-expected growth and Beijing’s promise of further stimulus measures. Japan, Continental Europe, the UK and Australia also performed well, while Asia ex Japan was relatively flat. At the sector level, water utilities, airports and marine ports were amongst the best performers over the period. In contrast, energy-related names struggled on the back of sharply lower oil prices.

Global fixed income

Global bonds were positive for the quarter, returning 1.3%⁸ in hedged NZD terms. Longer-term government bond yields were mostly lower (prices higher) over the period, driven in part by the asset class’s traditionally defensive characteristics in the wake of Trump’s sweeping tariff announcement and heightened geopolitical risks. Limiting the gains were expectations of fewer US interest rate cuts this year and concerns over America’s fiscal position after Moody’s downgraded the country’s credit rating.

New Zealand fixed income

The New Zealand bond market made reasonable gains over the period, returning 1.4%⁹. Domestic long-term government bond yields rose (in aggregate) in the second quarter; though only modestly. Like its global counterparts, the local bond market benefited from its traditionally defensive qualities amid heightened trade and geopolitical risks. Partly offsetting this was the RBNZ’s more cautious tone regarding the pace of future rate cuts following its May gathering.

^{Note: all returns are in local currencies unless otherwise stated.}

How did markets affect FireSuper investment options?

Strong gains from global equity markets again combined with lower inflation numbers delivered solid returns for all member options. Over the last year the Conservative option has returned 5.3%, Balanced 7.9% and Growth 9.9% after the deduction of fees and tax. The Cash option delivered a 3.3% return over the same period.

Over the last ten years the Conservative, Balanced and Growth options have returned 3.4%, 5.7% and 7.4% per annum respectively, after the deduction of fees and tax.

Looking ahead

The bounce-back in markets has been impressive, and it’s likely the rally could continue into the second half of the year. But the turbulence from April is a useful reminder that investors, regardless of their ultimate mission, should consider strengthening their portfolios to navigate the uncertain path that lies ahead.

We often get asked if U.S. exceptionalism is over. We see the potential for a pause in the outperformance of U.S. markets. But we believe the United States is likely to retain much of its strategic fundamental edge. America’s advantages include a stronger demographic profile than Western Europe, leading technology firms that remain at the cutting edge of AI and robust new business formation which is likely to support the country’s ongoing productivity margin.

In New Zealand growth is likely to remain below trend through mid-2026. The Reserve Bank of New Zealand will probably cut rates at least once more over the next 12 months, with officials recently noting a high degree of uncertainty around the outlook. New Zealand stocks have a similar outlook to Australia with modest earnings growth, while New Zealand government bonds are trading at attractive valuations.

_{¹Tokyo Stock Exchange Tokyo Price Index (TOPIX)}

_{²FTSE 100 Index}

³_{Shanghai Shenzhen CSI 300 Index}

_{⁴Dow Jones EuroStoxx 50 Price Index}

_{⁵S&P/NZX 50 Index with imputation credits}

_{⁶FTSE EPRA/NAREIT Developed Real Estate Index Net NZD Hedged}

_{⁷S&P Global Infrastructure Index (NZD hedged)}

_{⁸Bloomberg Global Aggregate Index – $NZ Hedged}

_{⁹Bloomberg NZ Bond Composite 0+ Yr Index}