Your quarterly market commentary

Market summary

The second quarter of 2025 has been a turbulent one, with markets around the world experiencing sharp ups and downs. This is a timely reminder of why it’s so important to have a well-diversified investment portfolio. Markets can shift quickly, and trying to constantly adjust your investments to keep up is incredibly difficult. That’s why staying focused, avoiding knee-jerk reactions, and sticking with a balanced, long-term strategy is often the smarter approach - rather than chasing trends or reacting to every new worry.

How have AMP funds fared?

Growth assets, such as equities, performed exceptionally well throughout the quarter, with no negative returns recorded. Our portfolios, which are 60% hedged to New Zealand dollar, benefited from the strengthening of the New Zealand dollar. All AMP named funds achieved positive returns, with the more aggressive risk profiles yielding returns of over 5%. This demonstrates the value of diversification and maintaining investments, especially considering the market upheaval in April.

For more insight into our investment approach and fund performance, click here: How we invest | AMP New Zealand

Market overview

United States: Despite ongoing policy changes, US share markets remained strong. The S&P 500 rose by 6.3% in June - its best monthly gain since November 2023. Technology stocks led the way, with Industrials and Consumer Discretionary also up more than 8% for the quarter. Defensive sectors like Health Care lagged behind.
The bond market faced pressure after Moody’s downgraded the US credit rating in May, pointing to growing concerns about government debt. Investment-grade corporate bonds returned 0.2%, while high-yield bonds did better at 1.7%. The Federal Reserve kept interest rates steady at 4.25–4.50%, noting that while the economy remains solid, there are rising risks of inflation and job losses.

Europe: European markets had a good quarter, helped by stronger business confidence, especially in Germany. The European Central Bank cut interest rates twice, lifting investor confidence. UK markets also performed well.

Emerging Markets: Emerging markets delivered strong returns. Eastern Europe and China benefited from upbeat economic forecasts and progress in artificial intelligence. Brazil and South Africa also made gains, while India and Taiwan underperformed.

Key Developments

Trade Policies: A key theme this quarter was shifting trade policy. The US paused several tariffs for 90 days, easing tensions and boosting hopes for US-UK trade deals and lower tariffs with China. These moves helped raise growth forecasts for both countries. However, concerns about a broader trade war and supply chain risks remain.

Economic Indicators: The US economy started the year in good shape, with early data showing minimal impact from tariffs. Still, rising inflation and falling business and consumer confidence are challenges. A new tax bill extending the 2017 tax cuts has raised concerns about growing national debt, which put pressure on the bond market.
In New Zealand, the economic outlook was mixed. Unemployment stayed at 5.1% in Q1, but wage growth was weaker than expected. The Reserve Bank cut interest rates by 0.25%, with more cuts possible. The Government’s Budget set a path to reduce deficits and return to surplus by June 2029.

Investor confidence boosts global markets in May

Investor confidence improved in May, helping global share markets bounce back. The S&P 500 rose 19% from its April lows, nearing record highs. Better-than-expected U.S. earnings, especially in the Communications Services sector, and positive trade news supported this rally.

What we’re watching

As we move forward, markets are likely to remain sensitive to new developments in trade policies and economic indicators. The evolving geopolitical landscape and policy shifts will continue to influence market dynamics. Investors would be wise to stay informed and maintain a steady investment plan to navigate the uncertainties ahead.

Summary

In conclusion, the past quarter has been marked by significant market movements and policy changes. While challenges remain, maintaining a long-term perspective in a diversified portfolio can help investors navigate market turbulence and achieve long-term goals. Trusting market resilience and a well-executed strategy is crucial amid volatility.

Thank you for reading our market commentaries. For assistance with your savings goals or any questions, please contact your adviser or AMP for support.