Market Overview – A Turbulent Start to 2025
The first quarter of 2025 began with cautious optimism in global markets. However, as the months progressed, momentum faded and share markets gave up early gains, driven largely by concerns over Donald Trump’s proposed tariff plans.
On 2 April — dubbed “Liberation Day” — the US announced the most sweeping tariffs seen since the 1930s. This triggered a sharp sell-off in global share markets as investors tried to assess the implications for global trade, corporate profits, and economic growth.
Closer to home, New Zealand interest rates were cut to 3.5%, following two reductions earlier this year — 0.5% in February and 0.25% in April. At the start of 2025, economists were forecasting an improving outlook for the NZ economy after two years of near-zero growth — but these projections will need to be revisited given the new trade headwinds.
What’s Behind the Tariffs?
The US tariffs announced as part of Liberation Day were far higher and broader than markets had expected.
While the exact methodology used to set the tariffs remains unclear, the likely outcome is higher prices for goods sold in the US, weaker demand, and lower company profits.
The secondary effects are harder to predict and depend largely on how other countries respond. Will nations like China impose reciprocal tariffs? Will global supply chains be reworked, or will companies take a wait-and-see approach?
What’s clear is that higher tariffs generally suppress economic activity, reduce demand, and lower company earnings — adding to the current market uncertainty.
Market Returns to 31 March 2025
Despite the recent turbulence, long-term investors have continued to see strong returns over the past year and decade.
| Index | 1-Year Return to 31 March 2025 | 3-Year Annualised Return | 10-Year Annualised Return |
|---|---|---|---|
| S&P 500 (US) | +13.9% | +16.6% p.a. | +15.6% p.a. |
| MSCI World ex-US | +11.6% | +11.7% p.a. | +7.9% p.a. |
| NZ Bonds | +7.3% | +4.2% p.a. | +3.4% p.a. |
| NZ Shares | +2.1% | +1.3% p.a. | +8.7% p.a. |
| Australian Shares | +3.8% | +6.3% p.a. | +7.8% p.a. |
While recent market falls (post-April) are not reflected in these figures, they highlight the benefits of staying invested through market cycles. Those investors who remained disciplined during past downturns have been well rewarded over the long term.
Currency Movements
The New Zealand dollar (NZD) remains weak against key global currencies.
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Against the US dollar, the NZD has been trading well below its 10-year average since 2022.
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Against the British pound, the NZD is close to a 10-year low.
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Against the Australian dollar, the NZD is also weak but not as severely as compared to the US dollar or British pound.
What Should Investors Do?
Periods of market uncertainty can naturally feel unsettling. However, history consistently shows that the best course of action is to stay calm, avoid reacting emotionally, and remain committed to your long-term investment plan.
Going to cash might feel like a safe option but can lock in losses and risks missing the market recovery when it comes.
Within your portfolios, you will already have an allocation to defensive assets such as cash and bonds — which help cushion against share market falls.
Final Thoughts
While the global situation remains fluid, and further policy changes are possible, maintaining a disciplined investment approach is critical.
Successful investing is not about chasing short-term returns or reacting to media headlines — it’s about trusting a long-term process that has historically rewarded patient investors.
If you have concerns about your investment strategy or would like to review your plan, please don’t hesitate to reach out — we’re here to help.
