Investing at all-time highs

Markets have performed strongly over the last three years, which can make it feel like valuations are very high. It's natural to wonder if something will happen or if this is a bubble. While some indicators suggest the market is expensive, this does not guarantee a crash. Market highs are often followed by correction periods but also reflect optimism about future growth.

Investors should understand that bubbles form when prices far exceed realistic values based on earnings or cash flow expectations. Currently, though risks exist, many companies maintain strong fundamentals, and some experts believe the current market environment reflects a new normal rather than an imminent collapse.

The best approach is to stay focused on long-term investing principles like compounding returns, diversification, and managing volatility through disciplined strategies. While cautious awareness is wise, reacting emotionally to market highs risks undermining long-term goals. Seeking professional advice can help tailor strategies to your needs and reduce anxiety about market fluctuations.

Get in touch today; our team is always happy to help.

Bridging Retirement Costs and Income

The Massey Retirement Expenditures Report 2025 shows retirees in New Zealand spend more than the New Zealand Superannuation they receive. For a single person living modestly in metro areas, the weekly shortfall is about $167. Couples living comfortably in cities may need to top up nearly $952 a week beyond NZ Super. Rising costs for essentials like food, energy, and rates are pushing these expenses up even faster than inflation.

The report highlights how much is required to maintain different retirement lifestyles. It estimates retirees will need between around $181,000 and $1 million in savings, depending on whether they live modestly or comfortably and on household size. Future retirees face challenges, as fewer younger New Zealanders own homes, which adds housing costs like rates or rent to the retirement budget.

For example, if you have accumulated $600,000 at the time you stop work (retirement), and if you have this money invested in a middle-risk/balanced format, you can draw down about $30,000 annually for 30 years after tax and fees (about $576 per week). Refer to the graph above.

The retirement report serves as a crucial guide for planning a financially secure retirement in New Zealand, reflecting real costs and lifestyle choices retirees face today.

Central Banks Ease to Boost Growth

The Reserve Bank of New Zealand (RBNZ) recently cut its official cash rate (OCR) by 50 basis points to 2.5%, the lowest level since mid-2022. This decision reflected concerns about weak and uneven economic growth and the ongoing challenge of anchoring inflation near its 2% target midpoint, which currently stands slightly above at 2.7%. The Monetary Policy Committee made this move to stimulate consumption and investment, signalling its readiness to support the economy amid uncertain conditions. Market expectations suggest further rate cuts could follow, potentially pushing the OCR down to around 2.25% in the near term to further anchor inflation and support economic recovery.

Similarly, the US Federal Reserve has also eased its key interest rates recently. In October 2025, the Fed lowered its benchmark federal funds rate by 25 basis points to a range of 3.75% to 4.00%, marking the second cut this year and bringing rates to their lowest level since 2022. This move was motivated by signs of a slowing labour market and concerns about downside risks to employment, even as inflation remains somewhat elevated above the Fed’s 2% target. The Fed has also indicated that further rate cuts may be forthcoming, though the timing remains data-dependent amid uncertainty caused by a prolonged government shutdown limiting access to economic data. Both central banks’ actions underscore a global trend of monetary easing aimed at boosting growth and stabilising inflation in the face of persistent economic challenges.

Rare Earths Market Surge

The global rare earth stocks have surged significantly in 2025, driven by heightened demand for critical minerals essential to electric vehicles, renewable energy, and defence technologies. Key market players like MP Materials, Lynas Rare Earths, and several newer U.S. companies have experienced remarkable stock gains as governments accelerate efforts to secure domestic supply chains and reduce dependency on China's dominant refining capacity. This surge is also fueled by geopolitical tensions and policies aimed at diversifying supply sources.

Despite the impressive growth, the sector remains volatile and capital intensive, with substantial risks tied to project execution, environmental scrutiny, and political dynamics, especially China's ability to influence global markets through export controls. Investors are advised to approach the sector cautiously, emphasising diversification and focusing on companies with solid production and offtake agreements to mitigate these risks.

Looking ahead, the rare earth market is viewed as entering a multi-year supercycle fuelled by the accelerating transition to clean energy and advanced technologies reliant on these materials. While some volatility and speculative surges are expected, the overall outlook is positive for firms that can successfully scale production and navigate geopolitical challenges. This positioning makes rare earth stocks a compelling but complex opportunity as global industrial strategies prioritise securing critical mineral supplies.

Market Update

New Zealand

• NZX 50 around 13,600, a slight weekly gain after an early dip.

• Utilities and healthcare led gains; real estate and industrial sectors lagged.

• RBNZ cut the official cash rate to 2.5%, signalling more easing possible.

• Mixed corporate earnings; ANZ profits down but outlook positive.

• Global uncertainties, including the US shutdown and China trade data, influence sentiment.

  
  

USA

• The Fed cut rates to 3.75%-4.00% to support slowing growth and inflation control.

• The ongoing US government shutdown causes economic data delays.

• US markets mixed amid cautious investor sentiment.

• Future rate moves are data-dependent, with watchfulness on Fed communications.

  
  

Asia

• Asian markets rebounded after the US shutdown deal; South Korea and Japan led gains.

• Tech and semiconductor stocks drove positive moves.

• China’s mixed macro data caused some sector sell-offs.

• Broad optimism as geopolitical and policy risks eased.

  
  

Europe

• Markets fluctuated amid inflation concerns and growth uncertainties.

• Technology and industrial sectors showed resilience.

• The Euro softened amid ECB policy watch and geopolitical factors.

• Corporate earnings and easing inflation provided some support

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If you would like to discuss your current 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