The mega forces shaping markets and how to navigate them confidently
- Jul 9
- 7 min read
Despite a backdrop of geopolitical tension and ongoing uncertainty, global markets have continued to show a surprising degree of resilience. Equity markets delivered a strong result over the most recent quarter, with the S&P 500 recording one of its best performances since 2020. Much of this strength has been driven by Information Technology (including Artificial Intelligence/AI and microchips), Industrials, Financials, and Health Care. The “Magnificent Seven” (Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla) now account for around 35% of the index, with a combined market capitalisation of ~$23 trillion USD. This concentration has prompted ongoing debate among investors about sustainability and whether elements of the current environment resemble a bubble.
At the centre of this discussion is artificial intelligence. While questions remain around valuation and the pace at which investment will translate into earnings, we believe AI represents a structural shift rather than a short-term trend. The pace and scale of AI development continue to accelerate, underpinned by substantial capital investment. Leading hyperscalers including Microsoft, Amazon, Alphabet (Google), and Meta are expected to collectively spend around $700-725 billion on AI infrastructure in 2026. This investment spans data centres, advanced AI chips, and the broader cloud ecosystem. While concerns around job displacement persist, economic history suggests that improvements in efficiency often lead to increased consumption and the creation of new industries and opportunities, rather than a lasting reduction in demand.
At the recent ANZ Adviser Retreat, we had the opportunity to hear directly from a range of industry leaders across economics, the regulator (Financial Markets Authority), academics, and investment management. A clear theme throughout was the importance of stepping back from individual asset classes and instead focusing on a total portfolio approach. This perspective is increasingly important in an environment where returns are more dispersed across regions, sectors and investment styles. We have seen periods where value-focused strategies have outperformed growth, alongside strong performance from Asia, emerging markets, and global listed infrastructure. The discussions reinforced the need for flexibility, careful manager selection and a well-diversified approach when navigating an evolving investment landscape.
Insights from the BlackRock session were particularly valuable in framing the broader forces shaping markets. Their view centred on a number of “mega forces” that are driving structural change, including:
Low-carbon transition
Demographic divergence
Geopolitics and economic competition
Digital disruption and AI
Future of finance
These forces are not only long-term themes but are already influencing market behaviour today, contributing to higher volatility and a wider range of outcomes for investors. The key takeaway for us was the importance of being deliberate in how portfolios are constructed, ensuring they remain resilient while still positioned to capture opportunities as these structural trends continue to unfold.
A fascinating insight shared by Professor Emeritus James Maclaurin (Deputy Vice-Chancellor, Academic), from the University of Otago, was a story on AI and its impact on businesses, people, and society. He highlighted a history lesson on coal and steam engines during the Industrial Revolution. This work by economist William Stanley Jevons, who observed in his 1865 book “The Coal Question” that James Watt’s more efficient steam engine did not reduce coal consumption. Instead, coal use increased dramatically. This gave rise to what is now known as Jevons Paradox, the idea that improvements in efficiency can sometimes lead to greater overall consumption rather than less.
The same principle may apply to AI. While AI can make people more productive and efficient, it does not necessarily mean fewer jobs. In many cases, increased productivity can create new opportunities, industries, and roles that did not previously exist. It was an encouraging perspective and a reminder that technological progress has often expanded human potential rather than simply replacing it. With global demand continuing to grow, there is reason to be optimistic that AI will create as well as transform jobs in the years ahead.
If you have any queries or concerns about how your investments are faring in the current markets or your financial, investment, lending, or retirement planning matters, please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.
Sincerely,
The Team at Trilogy Financial Solutions
OCR increased to 2.50%
The Reserve Bank of New Zealand (RBNZ) increased the Official Cash Rate (OCR) to 2.50% following its announcement on 8 July. This move was largely in line with our expectations, as we had anticipated that the central bank would continue tightening monetary policy to help contain inflation pressures. Recent global developments, particularly the impact of tensions in the Middle East, have added to inflation risks and reinforced the need for a proactive response.
While some of the current inflation drivers may prove to be temporary, it remains important for policymakers to maintain credibility in keeping inflation within the target range of 1% to 3%. Anchoring inflation expectations is a key priority, and decisive rate hikes can help ensure that pricing behaviour does not become entrenched at higher levels.
Looking ahead, future OCR decisions will remain highly data dependent. The RBNZ will be closely monitoring incoming economic indicators, including pricing behaviour, business activity, and overall economic momentum. The strength of demand in the economy will play a critical role in shaping inflation trends, and therefore the path of interest rates from here.
For investors, this environment reinforces the importance of staying disciplined and focused on long-term strategy while remaining mindful of how evolving interest rate dynamics may impact asset valuations and return expectations.
Social Welfare
Understanding the support available through New Zealand’s social welfare system can help individuals and families navigate periods of financial pressure with greater confidence. Whether facing a change in employment, health or life stage, knowing what assistance is available and how to access it can provide meaningful stability and peace of mind.
Income Support Payments
New Zealand provides a range of core income support payments to assist individuals and families through different life stages:
Jobseeker Support offers temporary financial assistance for people who are out of work or unable to work due to a health condition or injury.
Sole Parent Support is available for single parents caring for dependent children who may have limited ability to work full-time.
Supported Living Payment supports individuals with long-term health conditions, disabilities or caring responsibilities that significantly limit their ability to work.
New Zealand Superannuation and Veteran’s Pension provide regular income for eligible people aged 65 and over who meet residency requirements.
Additional Financial Support
Beyond base payments, there are several supplements designed to help with ongoing living costs:
Working for Families provides tax credits to support families with dependent children, helping to boost household income.
Accommodation Supplement contributes toward rent, board or mortgage costs, depending on income and living arrangements.
Temporary Additional Support can assist those facing ongoing financial shortfalls despite receiving other forms of assistance.
Community Services Card
The Community Services Card is one of the most widely used forms of support in New Zealand, designed to help reduce the cost of everyday essentials, particularly healthcare.
Benefits
Lower costs for doctor visits and prescriptions, which can make a meaningful difference for individuals and families managing regular medical needs
Discounts on a range of health-related services, including after-hours clinics and some specialists
Reduced public transport fares in certain regions, depending on local council policies
Access to additional concessions from some service providers, such as eyewear and utility support in specific circumstances
Eligibility
You must be at least 16 years old.
Generally based on income thresholds, which vary depending on whether you are single, partnered or have dependent children.
Available to people receiving certain benefits, such as Jobseeker Support, Sole Parent Support or New Zealand Superannuation.
Also available to low to middle income earners who meet the income criteria, even if they are working.
Applicants must usually be New Zealand citizens or permanent residents.
How to Apply
Applications can be made through Work and Income, either online, over the phone or at a local service centre.
In many cases, the card is issued automatically if you begin receiving a qualifying benefit.
If applying manually, you may need to provide proof of income, identity and residency.
Once approved, the card is sent by post and is typically valid for one year, after which it may be renewed if eligibility continues.
For many New Zealanders, the Community Services Card provides practical, day-to-day cost relief and can play an important role in supporting overall financial wellbeing. For more information, please click here.
Identification and Concession Cards
A number of other cards are available to help reduce costs and improve access to services:
The SuperGold Card is available to those aged 65 and over and provides benefits such as free off-peak public transport in many areas and discounts from participating businesses.
The Kiwi Access Card is a government-recognised photo ID designed for people who may not have a passport or driver licence, helping improve access to services, housing, banking and age verification where required
Eligibility Criteria
Eligibility for benefits and supplements generally depends on a number of key factors:
Income and asset levels are assessed to determine qualification for most supports.
Residency status is important, with most benefits requiring New Zealand citizenship or permanent residency.
Personal circumstances such as employment status, health, disability, or family structure are also considered.
How to Access Support
Accessing support is straightforward, with multiple options available:
Applications can be completed online through the MyMSD portal, where individuals can check eligibility, upload documents and track progress.
Phone support is available for those who prefer to speak directly with a representative.
In-person appointments at Work and Income service centres provide additional guidance and help ensure all available entitlements are considered.
Understanding and accessing these supports can help reduce financial pressure and provide stability during periods of transition, whether that is a change in employment, health, or family circumstances. If you need more information on any of these benefits, please click here.
Upcoming important dates
2 September
Next OCR update
October
TFS Quarter 4 review season
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
Disclaimer: This newsletter is for informational purposes only and should not be treated as financial advice.
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