Watch: our latest market update from Chief Investment Officer, Sean Henaghan, as he recaps the strong finish to 2025, the standout performance of share markets, and why staying diversified is so important.
The final months of 2025 capped off a remarkable year for global markets. For the first time since the pandemic, every major asset class from shares to bonds delivered positive returns for the full year.
While much of the year was shaped by concerns over trade and tariffs, the focus shifted in the fourth quarter to the positive impact of lower interest rates and government support. Notably, this was the year that “the rest of the world” caught up; for the first time in a long time, international stock markets generally outperformed the U.S.
New Zealand: Our local economy grew by a healthy 1.1% in Q3, beating expectations. To help maintain this momentum, the Reserve Bank of New Zealand (RBNZ) aggressively lowered its policy interest rate to 2.25% which supported a 1.9% rise in local shares.
Japan: It was a standout quarter for Japan, where stocks surged 12.2% (in yen). The massive new stimulus package from the government fueled a wave of optimism.
China: Markets remained steady and were roughly unchanged for the quarter.
The U.S. economy proved surprisingly resilient, growing 4.3% in the third quarter, well ahead of forecasts. This strength helped the market weather a difficult fourth quarter, which included the longest government shutdown in history and a rise in unemployment.
Two key factors kept investors optimistic:
While we saw some volatility at year-end, U.S. stocks still gained 2.7% for the quarter (in USD).
Europe performed strongly this quarter, with shares rising 6.5% (in euro). Investor confidence was boosted as the European Central Bank (ECB) raised its growth forecast for the year. While the manufacturing sector in Germany is still struggling, the service sector kept the job market stable.
The bond market delivered mixed results. U.S. bonds saw modest gains, but Japanese bonds faced a sell-off as investors reacted to the government’s high spending plans. New Zealand government bonds saw a small decline of 0.6% as longer-term interest rates increased.
In the currency markets, the U.S. dollar remained strong, which caused the New Zealand dollar to dip slightly by 1.0% against its U.S. counterpart.
As we head into 2026, the mood is one of cautious optimism. Inflation is moving in the right direction and major central banks seem prepared to continue cutting interest rates. While some technology stocks have high price tags, the fact that growth is spreading across different industries and countries is a healthy sign for your investments.