The investment environment in the quarter ended 31 December 2025 was characterised by a mix of positive global equity performance and cautious bond markets. International equities (i.e. global share markets) rose by 3.4%, supported by strong U.S. earnings in Q3 and the Federal Reserve’s rate cuts. Value stocks did well in December, as investors became cautious about the hype around artificial intelligence and reassessed risks. Strong, stable companies also performed well during this time. Emerging markets, particularly South Korea and Taiwan, saw gains of 5.6%, driven by strong local stock performances.

Closer to home, New Zealand shares increased by 2.0%, supported by better-than-expected economic growth data and the Reserve Bank of New Zealand’s decision to cut interest rates twice by a total of 0.75%, bringing the official cash rate down to 2.25%. This rate reduction, along with positive economic signals, improved the outlook for the domestic economy. On the contrary, Australian equities declined slightly by 1.0%, as high inflation persisted, prompting the Reserve Bank of Australia to hold its cash rate steady at 3.6%. Despite the rate cuts, New Zealand government bonds fell marginally by 0.2%, with market expectations suggesting the current easing cycle may be nearing its end.

Global listed infrastructure assets experienced a modest increase of 0.5%, while global listed property declined by 0.5%. Precious metals, however, had a strong quarter, with gold rising 12.8% and silver was up at 51.4%, as investors sought safety amid ongoing geopolitical tensions and economic uncertainties. Geopolitical risks remained elevated, with the U.S. conducting military operations in Venezuela in the first week of January 2026 and tensions between Japan and China intensifying. China’s introduction of an import quota on beef, though unlikely to impact New Zealand exports significantly, also added to the complex trade environment.

Overall, the outlook remains mixed, with ongoing geopolitical risks, the potential for further interest rate adjustments and artificial intelligence continuing to influence market sentiment in the months ahead.