It was a pretty good quarter for investors overall, though not every investment moved in the same direction. Here’s a quick look at what happened and what it might mean for you.
The global economy held up better than expected
Around the world, people kept spending, jobs were plentiful and businesses kept investing. The United States played a big part, with strong spending on technology, data centres and AI infrastructure.
Why does this matter to you as an investor? When an economy is growing, people and businesses tend to spend and invest more. That gives companies the chance to lift their sales and profits, which can help support investment returns over time.
Share markets moved higher
Global share markets rose over the quarter, although some areas did better than others. Technology and AI companies led the way, particularly in the US, while higher oil prices helped energy companies. Europe and Japan also made gains, and emerging markets were mixed but mostly positive.
Bonds had a tougher time
Rising energy prices, ongoing wage growth and a strong economy have raised worries that inflation could take longer to come down. That could mean central banks keep interest rates higher for longer.
Here’s why that matters for bonds. When interest rates go up, newly issued bonds pay better returns, which makes older bonds less appealing, so their value falls. Bond prices and interest rates generally move in opposite directions. Longer-term government bonds felt this the most. Corporate bonds held up better, helped by healthy company finances and earnings.
There is a silver lining. Higher yields mean bonds can now pay more income, which could support returns over the longer term.
A mixed quarter for other investments
Oil prices climbed as supply worries and tensions in the Middle East grew. That lifted commodity markets (investments in raw materials), but it also added to concerns about inflation and interest rates. Listed property and infrastructure had a harder quarter, as rising bond yields put pressure on their values, particularly for those designed to provide regular income.
What happened closer to home
New Zealand’s economy kept growing, just at a slower pace. Many households are still feeling the squeeze from higher living and borrowing costs, and inflation stayed high, partly because of rising fuel prices. The Reserve Bank responded by lifting the Official Cash Rate (OCR) twice during the quarter, to 2.75%.
New Zealand shares edged up but trailed many overseas markets, and bond prices came under pressure here too. As with global bonds, though, higher rates mean newly issued bonds now offer more income, which may benefit bond investors in the long run.
So, what does it all mean for you?
This quarter was a good reminder that markets can keep moving forward even when the outlook feels uncertain. Strong company earnings supported share markets, despite ongoing worries about inflation, interest rates and global tensions.
It also showed that different investments don’t always move together. Shares did well overall, while higher interest rates weighed on bonds. That’s exactly why it pays to stay diversified, keep an eye on the long term and not get too caught up in short-term ups and downs.
If you’d like to talk about how your investments are placed, or you have any questions, get in touch with the team at CM Financial Advisers. We’re always happy to chat.
