January and February actually got off to a pretty good start. Inflation was cooling down, economies were ticking along nicely, and it was shaping up to be a calmer year. Then in late February, tensions flared in the Middle East, oil and gas prices shot up, and markets started getting jittery.
By the end of March, share markets had dipped below where they started the year — but it was a gradual slide rather than any kind of dramatic crash. Tech companies had a tough time, while energy companies (unsurprisingly, given the oil price spike) did well. Meanwhile, our own Reserve Bank of New Zealand held interest rates steady, while Australia actually raised theirs. More on that below.
How’s the global economy holding up?
Pretty well, all things considered. The US economy kept growing, jobs markets stayed solid, and inflation had been slowly but surely coming down from the highs we saw in 2022 and 2023. Europe was in a similar position, and China’s recovery continued to support Asia broadly.
Here in New Zealand and Australia, inflation was still a touch above where central banks want it — but it was clearly heading in the right direction, and most people expected interest rates to stay on hold or even come down later in the year.
Then came the oil price shock in March. Conflict in the Middle East disrupted supply routes, petrol prices jumped, and suddenly the inflation picture got a little more complicated. It doesn’t mean we’re back to square one — but it does mean central banks need to tread carefully.
What are the central banks doing about it?
It depends where you look — and that’s actually an interesting shift from recent years when most central banks were moving in the same direction.
The US and Europe both hit pause, choosing to wait and see how things played out. Australia went the other way and raised rates twice during the quarter, trying to get on top of stubbornly high inflation.
Here in New Zealand, the Reserve Bank held the OCR (Official Cash Rate) steady. Domestic growth is a bit sluggish, but the RBNZ seems comfortable sitting tight for now while keeping a close eye on the data.
What did share markets actually do?
Most major markets finished the quarter a little lower — but the interesting story was really about which sectors went up and which went down, rather than a broad market collapse.
Tech companies had a tough run. Higher interest rate expectations hurt growth-focused companies, and the buzz around AI started to give way to harder questions about competition and real-world impact on businesses. On the flip side, energy companies had a great quarter as oil and gas prices rose.
Australia held up better than most, thanks to its strong mining and energy sector. New Zealand saw a modest dip, with most of the weakness coming in March.
What about bonds and the NZ dollar?
Bonds had a mixed quarter. Early on, falling inflation expectations were good news for bond prices. When oil prices spiked, that reversed a bit — but quality government bonds still did their job of cushioning portfolios when shares fell. That’s exactly what they’re in your portfolio to do.
The NZ and Australian dollars dipped slightly as global uncertainty grew. Meanwhile, the US dollar and Japanese yen — which investors tend to flock to in uncertain times — strengthened.
What does this mean for you?
Honestly? Not as much as the headlines might suggest.
Quarters like this one are a normal part of investing. Markets go up, markets go down, and occasionally something unexpected (like a spike in oil prices) throws a spanner in the works. What matters is that the big picture — economic growth, employment, the long-term direction of inflation — hasn’t materially changed for the worse.
If you’re invested for the long term, the best thing you can usually do is stay the course, keep your portfolio diversified, and avoid making knee-jerk decisions based on short-term noise.
Want to chat?
If this quarter has left you with questions — or you just want to check in and make sure your financial plan still feels right — we’d love to hear from you. Sometimes a quick conversation is all it takes to feel confident you’re on track.
Get in touch with the CM Financial Advisers team anytime.
