Market positivity despite 2025 turbulence

Markets are near all-time highs despite tariffs, bombings, and the ongoing geopolitical turbulence. The latest round of tariffs from President Trump—targeting imports from over a dozen countries with rates as high as 40%—has so far been met with a muted response from both Asia-Pacific and European equities, with indices like Japan’s Nikkei 225 and South Korea’s Kospi even posting modest gains this week.

This resilience comes despite heightened volatility earlier in the year, when sweeping tariff announcements and reciprocal measures triggered a sharp sell-off and a spike in the VIX index (which measures the volatility of the futures market) to levels not seen since the pandemic. Markets rebounded after a temporary pause and softening of tariff stances, suggesting that investors remain focused on longer-term fundamentals and the potential for quick policy reversals.

At the same time, global events—like unrest in the Middle East and the ongoing war in Ukraine—are still creating uncertainty, especially when it comes to oil prices, which tend to react quickly to headlines. That said, the overall mood has shifted. While investors are still being careful, there’s a bit more optimism in the air than there was a few months ago.

We believe it’s important to stay the course and to get advice before making any important financial decisions. The team here at Trilogy Financial Solutions is always here to help.

OCR Update and what’s next

OCR Update from Adrian

Check out the video below for Adrian’s take on the latest OCR update and what he expects going forward.

With interest rates remaining unchanged, let us know if you'd like any guidance on where to invest your short-term money. We can help you achieve returns of around 3.0% per annum on-call (with daily compounding) and up to 4.25% when investing for 12 months.

These on-call and term deposit options are Portfolio Investment Entity (PIE) products, and tax is capped at 28%. The top tax earners will save up to 11% on tax payments.

If you’re interested in learning more, get in touch by sending an email to info@trilogyfs.co.nz or calling us on 09 553 8928.

The trade war continues

President Trump has ramped up the trade war again, sending out a fresh round of letters to leaders in over 20 countries. He’s warning that steep new tariffs—between 20% and 40%—will kick in on August 1 unless new trade deals are made. This latest move targets countries like Japan, South Korea, the Philippines, Iraq, Algeria, and several others across Asia, Africa, and Eastern Europe.

What this means for you

The ripple effects of these tariffs will impact global trade flows, investor sentiment, and export-driven sectors. This kind of volatility tends to shake markets in the short term, but your diversified portfolios are better positioned to ride out the bumps.

As previously mentioned, the Reserve Bank of New Zealand is keeping a close eye on inflation and may lower interest rates if pressures continue to ease, which could support asset prices but also reduce returns on term deposits.

For now, the best approach is to stay focused on your investment goals, avoid reacting emotionally to headlines, and be assured that we have constructed your portfolio to best suit your situation.

Market update

United States

• Major indices are near record highs but showing volatility as investors react to President Trump’s new tariff announcements targeting more than a dozen countries, with rates up to 40% set for 1 August.

• The S&P 500 and Dow have seen minor declines over the past few days after recent highs, while the Nasdaq Composite reached a new record close, buoyed by tech sector strength.

• Market sentiment remains cautious, with modest gains in futures and an ongoing focus on trade policy uncertainty.

New Zealand

• The RBNZ held the OCR at 3.25% on 9 July. The central bank signalled only one more rate cut—likely to 3.00%—before the end of 2025, reflecting ongoing caution about inflation and economic outlook.

• The NZX50 index gained 1.6% over the past week and is up 7.5% year-to-date, despite a 0.8% drop on 3 July.

• The NZ dollar strengthened after a proposed Israel-Iran ceasefire and dovish signals from the US Federal Reserve, reflecting global risk-on sentiment and a weaker US dollar.

• Good news for parents with young children, as the FamilyBoost childcare rebate has been updated. The maximum rebate is now 40% (up from 25%) of weekly early childhood education fees, and the annual household income threshold for eligibility is now $229,000 (up from $180,000).

Australia

• The Reserve Bank of Australia (RBA) held the cash rate steady at 3.85% on 8 July, surprising markets that had widely expected a rate cut.

• The Australian share market (ASX 200) reached a new record high, gaining around 1% for the week, supported by strength in health, property, resources, and retail sectors. Investor optimism remains strong, with the ASX 200 on track for its 10th gain in 12 weeks, buoyed by expectations of future RBA rate cuts and positive leads from Wall Street.

Asia

• Key indices such as Japan’s Nikkei 225 and South Korea’s Kospi have posted modest gains despite being directly targeted by new US tariffs.

• Markets across Asia are digesting the potential impact of tariffs but have so far avoided sharp sell-offs, reflecting hopes for further negotiation before the 1 August deadline.

Europe

• European markets, including the Stoxx 600 index, also saw slight increases after the US tariff announcements.

• Investors are monitoring the situation closely, with European exporters potentially exposed to retaliatory measures and shifts in global trade flows.

  
  

Overall, global markets remain near all-time highs but are trading cautiously as the trade war intensifies and the 1st of August tariff deadline approaches.

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If you would like to discuss your investment portfolio, retirement planning needs, goals-based investing approach, or any other financial planning matters, please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.

We are always happy to help.

Sincerely,

The Team at Trilogy Financial Solutions

Disclaimer: The information in this newsletter is accurate at time of writing.

Keeping you informed

No doubt the ongoing tensions in the Middle East have caught your attention. It's important to keep you informed about current events that may impact your portfolio. Open communication is key to building a strong relationship and helping you avoid potential pitfalls in the market.

As the chart below shows, the S&P 500 (the 500 largest listed U.S. companies) has fully rebounded from its April decline (caused by Liberation Day tariffs), indicating the market has now absorbed the impact of earlier tariff worries.

S&P 500 performance over the last 3 months as at 24 June

Market resilience

The stock markets have been surprisingly resilient, with modest volatility despite the conflict in the Middle East —historical patterns show similar dips in geopolitical crises but often full recoveries within weeks. Defensive sectors like energy, utilities, and gold have outperformed; airlines continue to lag.

We are closely monitoring:

• U.S. involvement: direct intervention could sharply escalate markets and oil prices.

• Strait of Hormuz: any threat or closure would have outsized impacts.

• Diplomatic shifts or ceasefires—any easing can ease commodity and risk asset pressures.

So far, markets have demonstrated selective caution—with oil and safe-haven assets moving first, equities showing resilience. However, broader macro impacts like inflation, central-bank policy, and geopolitical spread remain critical. The next few weeks will likely determine whether this becomes just another geopolitical blip or something more consequential

Global market summary

• U.S. markets ended mixed due to fading optimism over U.S.-Iran negotiations after U.S. airstrikes, with the Federal Reserve holding rates steady amid global uncertainty.

• European markets declined as geopolitical risks overshadowed signals of looser monetary policy, with consumer confidence rising slightly but industrial and trade data lagging.

• Chinese markets weakened due to mixed macroeconomic data, where strong consumer activity was offset by slowing industrial production and persistent property sector weakness.

• New Zealand faces potential vulnerability to oil price shocks from Middle East tensions, which could worsen its terms of trade and fuel inflation, complicating the Reserve Bank of New Zealand’s policy decisions. The upcoming Official Cash Rate meeting on 9 July is anticipated to result in either a rate cut or a decision to hold rates steady.

Conclusion

Staying the course in investing is important because it helps you stay aligned with your long-term financial goals, despite short-term market fluctuations. History shows that markets go through cycles of volatility, but they tend to recover and grow over the long term. Reacting emotionally to short-term downturns often leads to poor timing—selling low and buying high. The portfolios we design are appropriately diversified and aligned with your goals to weather different market conditions. Sticking to your strategy avoids unnecessary disruptions.

If you would like to discuss your investment portfolio, retirement planning needs, goals-based investing approach, or any other financial planning matters, please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.

We are always happy to help.

Sincerely,

The Team at Trilogy Financial Solutions

The importance of time in the market

News around Trump’s push to renegotiate tariffs and the ongoing drama involving Elon Musk have been making headlines—and shaking things up a bit. While the broader market has held steady, Tesla’s share price has taken a hit in response to recent events.

We’ve also seen movement on the economic front, with budget announcements and interest rate cuts coming into play.

With all the noise and volatility, it’s worth remembering why we stay the course. The fund managers we work with are actively adjusting portfolios as needed, so you don’t have to react to every headline. It’s a timely reminder to keep your focus on medium- to long-term goals.

The graph below is a great visual of why time in the market beats trying to time the market—missing just a few key days can make a big difference (source: Russell Investments).

This graph shows the final outcomes of an initial $100K investment, based on how many of the best days in the market that the investment missed.

• If you missed none of the best days, the $100K would have grown by 129.2% (or 8.65% per year) over the 10 years ending 31 May 2024.

• If you missed the best 10 days, the $100K would have grown by 64.41% (or 5.10% per year) over the 10 years ending 31 May 2024.

• If you missed the best 20 days, the $100K would have grown by 33.85% (or 2.96% per year) over the 10 years ending 31 May 2024.

• If you missed the best 30 days, the $100K would have grown by 11.31% (or 1.08% per year) over the 10 years ending 31 May 2024.

• If you missed the best 40 days, the $100K would have lost 6.10% (or -0.63% per year) over the 10 years ending 31 May 2024.

As you can see, by missing just 10 days, your final outcome may only be half as good as you would have achieved by just staying invested.

The 2025 Budget and May OCR

Budget 2025 KiwiSaver changes

In the 2025 Budget, the government introduced changes to KiwiSaver and other sectors, including health, business, education, defence, infrastructure, cost of living, etc.

Click the button below to read more.

Read more

May 2025 OCR Decision

On 28 May, the Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) by 25 basis points to 3.25%, marking the second consecutive small cut.

Key points:

• Inflation rose to 2.5% in Q1 but remains within the RBNZ’s 1–3% target band.

• Core inflation is easing, and there’s spare capacity in the economy, which supports the case for rate cuts.

• The decision was not unanimous—one member of the Monetary Policy Committee was against the cut.

• The RBNZ is cautious about the global outlook, citing rising tariffs and policy uncertainty in major economies like the US and China.

• The central bank hinted at possibly one more cut later in the year.

The cut to 3.25% should ease mortgage costs and help households with the cost of living. The next OCR review is due on 9 July 2025.

For more information on the May OCR update, please click below.

Read more

Market update

United States

• The S&P 500 rose +6.2%, and the NASDAQ surged +9.6% in May, driven by tech sector strength.

• US 10-year treasury bond yield increased by around +0.14%, but bond markets remain volatile.

• Market optimism was fueled by easing trade tensions and postponed tariffs.

• Job growth exceeded expectations; unemployment remains steady at 4.2%.

• Inflation (CPI) came in lower than expected.

• The Federal Reserve held rates steady but signalled a more hawkish stance due to potential stagflation risks.

• Markets now expect two rate cuts of -0.25% each in September and December.

New Zealand

• Unemployment held at 5.1% in Q1 2025, better than the expected rise to 5.3%, due to a lower participation rate.

• Wage growth slowed, indicating a softening job market—aligned with RBNZ’s inflation goals.

• The Budget emphasised fiscal restraint; Treasury downgraded growth forecasts and raised borrowing needs.

• Market expectations now lean towards one more cut, with a small chance of a second.

• NZ term interest rates rose: 2-year +0.24%, 5-year +0.25%.

• The NZD appreciated by +0.47% in May.

Australia

• Employment data beat forecasts, showing continued economic strength.

• The RBA cut interest rates by -0.25% to 3.85%, with a dovish tone.

• The Board considered a larger cut but opted for caution due to inflation and uncertainty.

• Markets see an 80% chance of another rate cut in July.

Asia

• Asian markets in May saw strong gains, especially in Taiwan (up +3.13%) and South Korea (up +9.26%).

• A weaker US dollar and easing trade tensions with the US supported broader regional gains.

• China's market remained mixed, with cautious investor sentiment amid uneven economic data and ongoing trade negotiations.

Europe

• The MSCI Europe ex-UK Index rose +4.9% in May, supported by progress in US–EU trade negotiations, easing recession fears, and expectations of fiscal support and upward earnings revisions.

• The UK FTSE All-Share Index increased +4.1%, making it one of the weaker performers among major European markets.

• UK small-cap stocks outperformed, supported by a Bank of England rate cut and renewed UK–EU cooperation.

• Overall, European equities benefited from improved investor sentiment and transatlantic cooperation.

Finally, please check on your KiwiSaver contributions to make sure you’re on track to receive the maximise government contribution for this KiwiSaver year, which runs from 1 July 2024 to 30 June 2025. The government contribution is currently eligible for those aged 18 to 64.

If you would like to discuss your investment portfolio, retirement planning needs, goals-based investing approach, or any other financial planning matters, please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.

We are always happy to help.

Sincerely,

The Team at Trilogy Financial Solutions