Recession Fears Rise: What’s REALLY Happening In The Market? Q1 Report

Despite initial optimism, the market took an unexpected turn. Predictions of strong house price growth and continued bullish sentiment were quickly overturned as political uncertainty and global tariffs hit investor confidence hard. Recession fears became more than just a headline; they began influencing real market movements.

While the US sharemarket had been on a hot streak, the quarter ending March brought a swift correction. This was driven largely by political instability and tariff talk, which sent shockwaves through the global economy and sparked widespread volatility. As always, fear in the market can be as influential as fundamentals.

Volatility doesn’t just mean losses—it creates opportunity too. Global bonds and fixed interest investments delivered strong performance. Global bonds rose 8% over the past year, and New Zealand fixed interest climbed 0.7% over the quarter, adding up to 6% annually.

A surprise winner? Global infrastructure. Long suffering from high interest rates, this sector bounced back thanks to easing inflation and rate drops. Toll roads and airports delivered a quarterly return of 3.5%, and a stunning 18.9% over the year.

Shares told a different story. New Zealand, Australasian, and global shares were down across the quarter. Still, the broader 12-month view was more forgiving: global shares were up 13% unhedged and 7% hedged to NZD. So despite the slump, long-term investors have held on to solid gains.

Despite the market dip, balanced portfolios fared surprisingly well. Over the quarter, Lighthouse’s balanced portfolio (roughly 50–60% growth assets, 40–50% defensive) still managed a 0.2% return. And over the past five years, the annualised return is a healthy 8.3%.

This highlights the power of diversification. As sexy as chasing US shares might sound (we see you, S&P 500 fans), it’s the blend of bonds, local shares, property, and international exposure that keeps portfolios resilient.

Many investors panic when markets drop—especially in response to recession fears or geopolitical events. But reacting to news by shifting to cash or “safe” assets often means locking in losses. The market usually prices in bad news before the average investor has even had a chance to act.

Instead, staying invested and sticking to your long-term strategy is the winning move. Historical data shows markets regularly correct during the year, and big downturns often look like noise in hindsight.

A research snapshot from Lighthouse’s partners shows that the US market is forecast to grow just 4% per annum over the next 5–7 years—lower than New Zealand (6%) and Europe (8%). That’s a strong case for spreading your bets.

And if you think you can pick the best-performing sector or market each year? Think again. Historical charts show it’s nearly impossible to consistently choose winners. Timing the market doesn’t beat time in the market.

• Recession fears and political volatility drove a tough Q1 for global shares.
• Bonds and infrastructure were the surprise performers, bouncing back as interest rates dropped.
• Balanced portfolios showed their strength, with Lighthouse portfolios staying positive for the quarter.
• Long-term strategy matters more than short-term reaction—panic selling only locks in losses.
• Diversification is key: don’t put all your eggs in the S&P 500 basket.
• Market predictions are unreliable—focus on discipline, not guessing the next big winner.

If you’ve got a lump sum and want to know whether to invest, pay down debt, or make another move—reach out to Lighthouse Wealth for a personalised financial plan. 

If you’d like to learn more, check out these other episodes below.