February was a positive month for global markets. Encouragingly, growth came from a wider range of regions and industries. Investors began shifting some of their money away from the large technology companies that have dominated markets in recent years. Instead, they looked toward smaller companies and businesses that may offer better value.
In New Zealand, retail spending slowed in the final quarter of last year, and inflation data was mixed. The Reserve Bank held the cash rate at 2.25%.
In the United States, economic growth at the end of last year was softer than expected. However, consumer confidence and optimism among manufacturers improved. A notable US legal ruling against the Administration’s April 2025 trade tariffs also helped ease some global trade concerns.
In Europe, the outlook is gradually improving. While retail sales and industrial production were still weak, confidence in the manufacturing sector is rising and inflation has continued to ease.
Closer to home, the Reserve Bank of Australia raised their policy interest rate slightly to 3.85%. Most other central banks chose to hold rates steady while they monitor inflation.
The global economy continues to show resilience, though we are closely monitoring the geopolitical tensions in the Middle East that escalated as the month drew to a close.
New Zealand shares rose 2.2%, while Australian shares gained 4.1% (in Australian dollars).
Global shares grew by 2.1% (in NZD) in February, but the interesting story was where that growth came from.
Share prices of large technology companies fell: After a long period of outperformance, the share prices of the largest US technology companies declined. Investors are starting to question how quickly large investments in Artificial Intelligence will translate into profits.
Smaller companies and global listed infrastructure stocks gained momentum: As investors moved away from expensive software and tech names, they moved toward industries like materials, utilities and energy. Global listed infrastructure companies were the standout performers, gaining 8.8% (in local currency terms) over the month.
Japan was a global leader: Japan was a global leader this month, with markets surging over 10.4% (in Yen) This followed Prime Minister Sanae Takaichi’s decisive election victory, which increased expectations of new economic stimulus.
Bonds had a strong month, returning 1.9% (in NZD) globally and the US dollar index added +0.6% (in USD). This was driven in part by increased demand for US government bonds, as investors sought safer investments amid rising geopolitical tensions.
In New Zealand, local government bonds performed exceptionally well, returning 3.5%. This came as the Reserve Bank signalled interest rates may remain lower for longer and investors sought quality and stability.
The New Zealand dollar fell 0.8% against the US dollar over the month.
As we move into March, we are mindful of the increased volatility triggered by recent events in the Middle East and the ongoing debate surrounding AI’s impact on the world. However, returns are now coming from a wider range of companies, which is encouraging and suggests that markets are becoming less reliant on a small number of companies.
Our focus remains on maintaining a disciplined, diversified approach to navigate these changing conditions while identifying opportunities for growth as they arise.