Market review
A summary of how financial markets performed during the first quarter of 2025.
It was a volatile start to the year for global equities, driven largely by US President Donald Trump’s trade policy announcements. The uncertainty around trade policy saw US markets underperform most of its global peers. In New Zealand, the quarter was highlighted by the Reserve Bank of New Zealand (RBNZ) meeting in February, where it cut the Official Cash Rate (OCR) by 50 basis points.
Global markets
US share markets actually started the quarter on a positive note, trading to record highs. But as uncertainty grew around Trump’s approach to tariffs, then the announcement of significant tariffs on many of its trading partners, US share markets reversed course and ended the quarter lower.
At a sector level, concerns around competition in the AI sector saw the Nasdaq 100 Index fall 10.3%, while the S&P 500 Index was 4.3% lower.
European equity markets showed resilience, however, with the Euro Stoxx 50 Index up a solid 7.5% and the UK’s FTSE 100 Index gaining 6.1%. Both regions benefitted from a continuation of interest rate cuts. In Asia, Japan’s Nikkei 225 Index was down 9.9% amid worries about US tariffs and their economic implications, while China’s Shanghai Composite Index fell only 0.2%.
Global bond markets also experienced heightened levels of volatility. In the US, bonds finished higher as demand for safe-haven assets grew amid trade policy uncertainty, while in Europe, German bonds fell sharply, reflecting concerns about increased defence spending. When bond yields decline, bond prices rise.
During the quarter, the US Federal Reserve left interest rates unchanged, while other central banks including those in Canada, Sweden and the eurozone continued to cut interest rates.
New Zealand market
The NZX 50 Index saw a decline of 6.4% over the quarter, underperforming several of its overseas counterparts. The market was dragged down by large caps, while mid and small cap stocks outperformed.
The RBNZ cut the OCR by 50 basis points in February, responding to a prolonged period of sluggish growth and falling inflation, which fell back inside the central bank’s target range.
Meanwhile, in economic data, the unemployment rate jumped to 5.1%, up from 4.8%, while GDP expanded by 0.7% in the final quarter of 2024, helped by primary industries, retail trade, transport and accommodation.
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Past performance does not indicate future performance. The actual performance realised by any given investor will depend on many things, is not guaranteed, and may be negative as well as positive.
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