There was significant market variation across regions and sectors in the quarter ending December 2024. Overall, global equities ended the year positively, boosted by the conclusive victory of Donald Trump in the US presidential election in November. This was arguably more about calming fears that escalated leading into the election, than it was optimism about the prospects looking forward.

It wasn’t all positive though, as the outlook for emerging markets and more sustainable, pro-environmental companies and strategies took a hit in the wake of the election result. The potential inflationary effects of widespread and substantial tariffs (if imposed by the US) also tempered expectations of further interest rate cuts in 2025. This took some of the heat out of the post-election equity rally in December and weighed on returns from fixed interest markets (which tend to be higher when interest rates are expected to decrease). As a result, global fixed interest returns were negative for the final quarter of 2024.

In contrast, the Reserve Bank of New Zealand (‘RBNZ’) implemented two consecutive 0.5% cuts to the Official Cash Rate (‘OCR’) during the quarter, as the CPI (‘Consumer Price Index’) and core inflation returned to within the RBNZ’s 1-3% target range. The OCR ended the year at 4.25%, down from a high of 5.5% in mid-2024. These relatively aggressive cuts helped New Zealand equities and bonds to deliver positive returns for the December quarter.

All the Scheme’s investment options achieved positive returns in the December quarter, building on the positive momentum throughout much of 2024.