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Global markets have taken a tumble—and so has investor confidence. In the last few weeks, we’ve seen sharp declines from Wall Street to the NZX 50. With headlines warning of major losses and political decisions like U.S. trade tariffs shaking things up, many investors are wondering: What’s really going on? And more importantly, what should Kiwi investors be doing about it?
Whether you’re invested in a growth portfolio, a balanced fund, or simply making regular KiwiSaver contributions, it’s important to understand what this market correction means—and how you can respond in a way that aligns with your long-term goals.
Let’s dig into the numbers, the political backdrop, and the opportunities that still exist—even when markets are down.
What’s Driving the Market Drop?
The numbers are stark. In just one week, Wall Street lost over $5 trillion in value. The S&P 500 is down 13% for the year, the Nasdaq has fallen 20%, and New Zealand’s NZX 50 is down 10%. These are the biggest drops we’ve seen since the early days of the COVID-19 pandemic.
The cause? In large part, it’s down to trade tariffs introduced by the United States under former President Donald Trump. Tariffs are essentially taxes on imported goods, and when the world’s largest economy implements them, the effects ripple across the global economy. Prices rise, inflation rears its head, and business confidence takes a hit.
Why Tariffs Matter (and Hurt)
It might seem like a niche policy issue, but tariffs affect everyone. When the US makes it more expensive for other countries to sell goods into its market, those products become less competitive. This isn’t just a localised issue—it shakes the foundations of global trade.
Historically, tariffs were common. But in today’s connected economy, they’re usually introduced for political reasons rather than economic benefit. And while countries like the Cayman Islands could introduce tariffs without moving the needle globally, the US doesn’t have that luxury—its actions shift markets.
When tariffs go up, two things happen:
1. Inflation Rises
Imported goods become more expensive, which eats into consumers’ discretionary income and can reduce investment and spending elsewhere. In this case, US-made goods may also rise in price, further fuelling inflation.
2. Business Confidence Falls
Companies struggle to make confident decisions about hiring, expansion, or capital investment when the rules of global trade are unclear. And in New Zealand, despite slightly improved sentiment, many businesses are still pulling back—cutting hours, reducing staff, and delaying major decisions.
How Markets Respond
The share market is forward-looking. When new information—like tariffs—is introduced, investors quickly reassess the future profitability of companies. Uncertainty prompts a shift from higher-risk assets to safer investments like cash and bonds.
This triggers sell-offs, which lower share prices, which prompt more selling—a cycle that can create sharp drops across global markets.
But here’s the key: headlines don’t always tell the full story. And for Kiwi investors, context is everything.
What Should Kiwi Investors Do Right Now?
Your response depends on your investment timeframe and goals:
If You Have a Short-Term Goal
You probably shouldn’t have been in volatile assets to begin with. If you’re planning a big purchase like a house in the next 12 months, now is not the time to be exposed to equity market swings. There’s no guarantee things will recover in time.
If You’re a Long-Term Investor
Stay the course. Market dips are part of the journey—dot-com crash, 9/11, the GFC, COVID, and now tariffs. This isn’t new. Over time, diversified portfolios tend to recover and grow.
If You’re a Buyer (or Regular Investor)
It’s a huge win. Lower prices mean more bang for your buck. If you’re contributing to KiwiSaver or investing steadily, think of this as a discount—your money is buying more units while prices are low.
If You’re in a Balanced Portfolio
You’re likely experiencing less volatility than the headline numbers suggest. For example, while global shares have dropped 9% over the past month:
Australasian shares are down 6%
Bonds have performed well—up around 7% over the past year
A balanced portfolio—typically made up of 60% shares/property and 40% bonds/cash—helps cushion the blow in times like these. Over the past month, balanced portfolios are down around 4.5%, well within expected movement for this type of risk profile.
Key Takeaways
Markets have dropped significantly, but this isn’t a new phenomenon—history shows markets bounce back over time.
Tariffs from the US are causing inflation pressures and global uncertainty, but they’re likely politically motivated and temporary.
A balanced portfolio helps absorb volatility, and bonds are currently performing well.
Short-term investors should reconsider their asset exposure; long-term investors should stay calm and stay the course.
Volatility presents opportunities—especially for buyers and KiwiSaver contributors continuing to invest regularly.
If market movements are making you uneasy, it may be time to reassess your risk profile with a financial adviser.
Next Steps
Worried about how this affects your portfolio? We’re here to help. If you’d like to review your investment plan or just chat about the markets, get in touch with the Lighthouse team today.
If you’d like to learn more, check out these other episodes below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
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.
