In our latest market update, we review how global and local markets performed over the September quarter. From strong equity gains and a weaker New Zealand dollar to shifting interest rate expectations, here’s how key asset classes moved - and what it could mean for investors heading into the next quarter.
Global Markets Rally as Rate Cuts and Resilient Economies Drive Growth
Most asset classes delivered strong returns over the September quarter, helped by a weaker New Zealand dollar and solid global economic data. Global equity markets performed well across both developed and emerging regions, with unhedged investors benefiting the most from currency movements.
Global markets were buoyed by a combination of interest rate cuts and stronger-than-expected growth across the United States, Europe, and much of the Asia-Pacific region – with New Zealand being the key exception. The ongoing artificial intelligence boom continued to drive large-cap technology companies such as Alphabet (Google) and Nvidia, though gains extended across a wide range of sectors.
Global equities rose 7.5% in local currency and NZD-hedged terms, and an impressive 12% for unhedged investors. Over the past year, unhedged global equity investors saw returns of around 29%, compared with 17% for NZD-hedged investors, highlighting the impact of the falling New Zealand dollar.
Currency Weakness Amplifies Global Returns
The New Zealand dollar declined by approximately 5% over the quarter against major currencies including the US dollar, euro, and Australian dollar. Markets priced in further interest rate cuts by the Reserve Bank of New Zealand, adding to the currency pressure.
Within global equities, smaller companies outperformed, rising about 13.5% in NZD terms, while value stocks gained around 10.5%. Australian equities also delivered strong results, rising 16% over the year, led by value stocks up 23% and small caps up 27%. Emerging market equities performed in line with developed markets, returning 16% for the quarter and matching annual performance.
Local Markets: Weaker Economy, Stronger Bonds
New Zealand’s weaker economic conditions weighed on the local share market but boosted bond performance as markets anticipated lower interest rates ahead. The NZ share market gained 5.8% for the quarter and 7.7% over the year.
NZ bonds performed strongly, up 3% for the quarter and 6% over the year, while offshore bonds returned smaller gains of 1% and 2%, respectively. Sectors sensitive to interest rates – such as global property and infrastructure – also performed well, rising 4% in NZD-hedged terms and 9% unhedged.
Alternative assets, including gold and trend-following strategies, continued to deliver diversification benefits relative to global bonds.
Looking Ahead: NZ’s Recovery and Currency Outlook
While global investors remain focused on US-centric risks, New Zealand presents an interesting contrast: a weak domestic economy paired with strong agricultural commodity prices. Rural New Zealand is showing signs of recovery, and the country’s trade balance is improving, both factors that typically precede a stronger currency.
Although it’s difficult to pinpoint when this turnaround will occur, the data suggests that the current currency cycle still has some way to run – offering opportunities for patient investors as conditions stabilise.
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Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
