Investment Market Commentary – 28 February 2025

Thursday 13 March 2025

Share markets were mixed over February, as a variety of different crosscurrents led to some large regional disparities in performance. In aggregate, the global share market¹ ended February down 0.8% (all returns are in local currency terms unless stated), with the US market² a large contributor to this softer result, as it declined 1.3%. New Zealand³ and Australian⁴ share markets also declined, 3.0% and 3.8% respectively. On the other hand, the European share market⁵ continued its impressive start to the year, gaining 3.4% over February. 

February started promisingly for the US share market, hitting 2 all-time closing highs. However, sentiment quickly turned, as several headwinds, including uncertainty over President Trump’s tariff and policy agenda and some weaker US economic data, saw some begin to question the US economy’s resiliency. Also hindering US share market performance was the so called Magnificent Seven⁶ stocks as they continue to struggle this year over concerns that the artificial intelligence rally could be losing momentum. Six of the Magnificent Seven stocks have experienced a decline over the first 2 months of the year, with Tesla shares falling 27%. Meta Platforms is the only Magnificent Seven company to provide a positive return year-to-date, up 14%.

The European share market extended its outperformance over US shares for another month, which contrasts with its lacklustre performance over the past decade. Attractive market valuations and encouraging economic and company results versus depressed expectations helped overcome trade policy uncertainty from the US. Together with optimism that German fiscal reform may occur post-election, and some hope for a Ukraine ceasefire (although this situation looks extremely fluid), it appears we are passing peak pessimism for the region.

Domestically, the share market ended the month lower, impacted by a weaker than expected earnings season, as companies continue to battle in an economy struggling to turn the corner. Of note, was Spark New Zealand reporting a 78% fall in net profit in the first half of its 2025 financial year and reducing its forward-looking guidance. The company’s share price tumbled 

22% over February. Ryman Healthcare’s share price also struggled, as it looked to raise $1b to strengthen its balance sheet. This is the second capital in 3 years. Ryman’s share price ended down 24% over February.

In fixed interest, US Treasury yields declined (prices move inversely to yields) as economic data points to a possible soft patch in the US economy and policy uncertainty also weighed on sentiment. The 10-year US Treasury yield finished February at 4.21%, down from 4.54% a month earlier. Domestically, the Reserve Bank delivered on expectations, cutting the Official Cash Rate by a further 0.50%. Given the interest rate cut was well anticipated, yields were relatively unchanged over the month, with the 10-year NZ Government Bond yield at 4.51%.

The differing fortunes of various market indices are illustrated in the chart below.

Note: Returns are in local currency terms.

The outlook

Heading into 2025, our broad view on the economic and markets backdrop was generally constructive, or at least non-negative, with an expectation that ongoing US economic health would help foster the conditions for another reasonable year for multi-asset portfolio returns overall. Yet, we also felt it would be a year where investors would have to face a few curveballs and surprises and for there to be periods where markets questioned whether those reasonable returns could in fact be achieved.

Right now, a softer run of US data, elevated policy uncertainty, and a few more questions about US technology dominance, have seen some begin to question US market leadership. Particularly after it has been such a dominant force in financial markets for some years. We still have confidence in the US story, even if elevated valuations do mean that there is less room for error. In our view, a lot needs to change both within and outside of the US before one could begin to seriously question US market leadership more structurally. It is perhaps useful to note that the best times for investors to profit and be rewarded from certain views is when the market is a little more sceptical. While there are indeed risks, which we are monitoring closely, that scepticism is now growing, and so arguably, some value is too. Furthermore, recent developments are also consistent with a view that 2025 is likely to be a year with a more diverse and broader set of opportunities for investors, and our active management style should allow us to target these where we have conviction.

We have useful online tools to help you:

• Our Fund Finder can help you see if you're in the right Fund for your circumstances.   
• Our KiwiSaver Retirement Calculator can help you understand if your retirement savings are on track.
• Our MAS Investor Portal can help you manage your investments online.

If you decide to change your Fund after reviewing your risk profile or meeting with a MAS Adviser, you can make a switch via the MAS Investor Portal, or alternatively you can complete an investment strategy change request form. There is no fee for switching. Links to the relevant forms are below.     

• MAS KiwiSaver Scheme: KiwiSaver Documents and Forms – MAS  
• MAS Retirement Savings Scheme: Retirement Savings Scheme Documents and Forms – MAS  
• MAS Investment Funds: Investment Funds Documentations and Forms

You can see weekly updates on fund unit prices and returns on our website:  

• MAS KiwiSaver Scheme: KiwiSaver Funds – MAS  
• MAS Retirement Savings Scheme: Retirement Savings Scheme Funds | MAS – MAS  
• MAS Investment Funds: Investment Funds – MAS