In this October market update, our Chief Investment Officer, Sean Henaghan, explains what’s driving markets and why we’re staying cautiously positioned.
October brought a welcome lift in global market sentiment, primarily driven by two key developments.
First, a high-profile meeting between US and Chinese leaders resulted in a temporary trade truce. This helped ease immediate investor concerns, with the US pausing further tariff increases and China agreeing to limit export restrictions on rare minerals. While this boosted confidence, longer-term tensions between the two countries remain unresolved.
Second, momentum in the Artificial Intelligence (AI) sector continued to drive US market performance. Despite mixed earnings reports from some large tech firms, new partnerships and deal activity reinforced optimism about the sector’s long-term potential.
In terms of interest rates, the US Federal Reserve (Fed) delivered a widely expected 0.25% cut, lowering its target range to 3.75–4.00% as inflation showed signs of easing. However, Fed Chair Jerome Powell adopted a cautious tone, signalling that more cuts are not guaranteed. Investors responded by dialling back expectations for further policy easing. In contrast, the European Central Bank held rates steady, expressing confidence in its inflation outlook.
In New Zealand, the Reserve Bank made a stronger move — cutting the Official Cash Rate by 0.50%. This decisive step showed a clear commitment to supporting the local economy. Later in the month, Q3 inflation data came in as expected at 1.0% for the quarter.
Equities
Global shares delivered solid gains. The MSCI World Index rose by 4.0% (in NZD) with growth stocks (+6.2% in NZD) outperforming value stocks (+1.5% in NZD). The US S&P 500 finished up 3.8% (in NZD), buoyed by tech companies. Closer to home, the NZX50 rose 1.9%, supported by the Reserve Bank’s interest rate cut.
Fixed Income
While Global Bonds fell by 0.3% (in US$) generally, specific regions performed well. The RBNZ’s action directly benefited New Zealand bonds, pushing the 10-year yield down by 0.1%.
Currencies
The contrast between the RBNZ’s large rate cut and the Fed’s cautious stance contributed to the New Zealand dollar losing 1.4% against the US dollar.
Gold
Gold surged past US$4,000 per ounce — a sign that despite equity gains, many investors remain cautious and are seeking safe havens.
While October was a month of strong equity performance globally, it was also marked by deep policy differences and underlying structural risks.
Your portfolio is positioned to benefit from major growth trends, like AI, while maintaining some defence against geopolitical instability and shifts in central bank policy.
The RBNZ’s rate cut is positive for local investment, and we continue to monitor market developments closely to ensure our funds are resilient and deliver long-term growth.