Market update – Quarter ended 30 September 2025

Markets

US equities rose 7.8%^[1] for the September 2025 quarter, with large technology companies including Intel, Tesla, Alphabet, Oracle, and Apple posting strong gains, while European equities gained 3.1%^[2], despite political tensions in France. NZ equities delivered improved returns, up 5.5%^[3] for the quarter, as investor confidence was buoyed by lower interest rates. Bond markets posted modest gains, with NZ bonds outperforming global bonds. The NZ dollar hit a three-year low against the Australian dollar in September – this was challenging for consumers but positive for exporters.

Context

The global economy has held up better than expected from trade headwinds. The increases in tariffs haven’t hit as hard as feared, as companies have partially absorbed costs. However, an increase in US inflation is expected toward year-end as companies adjust their pricing, but less than initially thought.

US companies posted strong earnings growth in the June quarter, and European companies also showed modest improvement. Spending in the technology sector and data centre construction supported growth and helped offset signs of weakness in the US labour market. Consumption in the US is increasingly driven by wealthier households, as wage growth has slowed. The political pressure on the US Federal Reserve (Fed) surged over the quarter and financial markets are pricing several interest rate cuts by the Fed over the coming months.

In New Zealand, the economy shrank 0.9% in the June quarter, with weakness across key sectors, while unemployment climbed to 5.2%. The Reserve Bank of New Zealand (RBNZ) cut the official cash rate to 3.00% and indicated there may be further cuts to help turn around slowing economic growth.

What this means

• Businesses: lower interest rates and a weaker NZ dollar may help exporters and reduce borrowing costs. But slowing economic growth and rising unemployment may dampen demand and investment.
• Consumers: lower interest rates may provide some relief, but job market weakness could limit spending and confidence.
• Investors: strong global equities and AI momentum could create opportunities, but trade policy uncertainty and economic challenges in New Zealand call for a selective, cautious approach.

Key points for investors

Recent quarters have brought both gains and volatility. However, with valuations across many share markets at high levels, investors can expect to see a correction in market pricing towards historical averages at some point. Such corrections create opportunities for active managers to acquire quality assets at more attractive valuations. Short-term fluctuations are a normal part of investing. For long-term investors, staying in the right fund, aligned with your goals increases the likelihood of growth over time.

^{[1] S&P 500 Index (in USD)}

^{[2] STOXX Europe 600 Price Index (in Euros)}

^{[3] S&P/NZX 50 Total Return Index (in NZD)}