Monday 14 April 2025

Before we touch on the April US tariff announcement that rattled share markets, let’s start with what happened over the March quarter.

Share markets around the world delivered mixed results over the quarter. Several crosscurrents led to some large regional disparities in performance. In aggregate, the global share market1 ended March down 4.4% (all returns are in local currency terms unless stated), and the quarter down 2.0%. As uncertainty over the US tariff announcement increased, investors sought the relative safety of bonds. The demand for fixed interest investments pushed bond prices higher and yields lower. Fully hedged global bonds delivered a positive return of 1.1% over the March quarter.

The March quarter started positively for the US share market2, hitting multiple all-time highs. However, as the quarter progressed, uncertainty and price volatility increased. Concerns over impending tariffs, inflation and economic growth all unsettled investors. The US share market ultimately finished 4.3% lower over the quarter. In January, DeepSeek, a Chinese privately owned Chinese technology company, announced it had developed an artificial intelligence (AI) model at a fraction of the cost of the large US companies. This called into question the dominance (and high valuations) of US technology companies in the AI space. This saw global technology stocks come under pressure during the quarter, with the S&P 500 Information Technology sector in the US ending down -12.6%.

The European share market3 experienced a strong quarter, gaining 5.9%. Attractive market valuations and encouraging economic and company results against weak expectations helped overcome trade policy uncertainty from the US. The top performing sectors over the quarter were financials, energy and utilities. The German market4 was a particularly strong performer, ending 11.3% higher, as the German government reformed its constitution to allow for a large increase in defence and infrastructure spending.

Domestically, the share market5 ended lower over the quarter, down 6.4%, impacted by talks of US tariffs, company capital raisings and a generally weaker than expected earnings season. Infratil and Fisher & Paykel Healthcare were caught up in the DeepSeek and while Spark New Zealand reported a fall in net profit and reduced its forward-looking guidance. Across the Tasman, the Australian share market6 held up better than the New Zealand market, ultimately ending 2.8% lower.

In fixed interest, US Treasury yields declined (prices move inversely to yields) as economic data pointed to a possible soft patch in the US economy, before tariff uncertainty further weighed on sentiment. Over the quarter, fully hedged international fixed interest7 returned 1.1%, while New Zealand fixed interest8 gained 0.7%.

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

Returns of selected major markets to 31 March 2025

Note: Returns are in local currency terms.

What this means for our funds over the March quarter

The chart below shows selected returns for all funds in the MAS KiwiSaver Scheme. Returns for comparable funds in the MAS Retirement Savings Scheme and the MAS Investment Funds are similar.

MAS KiwiSaver Scheme Fund returns to March 2025

*Returns are after total annual fund charges and before tax.

Key points to note from the chart above 

  • The March quarter saw share markets give some gains back, meaning the more growth orientated funds underperformed the more conservative funds over the quarter.
  • The underperformance of growth assets (shares) relative to income assets (bonds) over the quarter, has seen all funds deliver reasonably similar returns over the 12-month period ending March 2025.

Now onto April

On Thursday 3 April (NZ time), the Trump administration announced its long-awaited ‘reciprocal’ tariff policy. The magnitude and scope of the tariffs were significantly more aggressive than expected.

Initially, the US tariff plan consisted of two-parts, with New Zealand and Australia caught in the universal 10% tariff on all imports into the US, taking effect from 5 April. The second part captured around 60 countries, which were set to face higher tariffs from 9 April. With such an aggressive stance, and the risks it created for global economic growth, it was not surprising to see share markets around the world decline following the announcement.

This is still a fluid situation, with events unfolding daily. A few days after President Trump’s initial tariff announcement, he backtracked on the tariffs of most countries targeted in the higher tariff bracket. These were dropped to 10% for 90 days to provide time for negotiations for those countries that hadn’t retaliated. China was the notable exception, it immediately retaliated, and is now in an escalating tariff war with the US. The tariff reprieve saw a significant market rally on Wednesday 9 April, with the US share market gaining almost 10% on the day.

Our lead investment manager, JBWere, discusses the evolving tariff situation in the below video.

 

The outlook

Markets were somewhat braced for Trump’s ’Liberation Day’ tariffs, but the severity of what was announced was unexpected. The size, scope and the justification for tariffs left many stunned. The economic consequences could be large. The key question is do these tariffs persist, or are they rolled back.

This is an unprecedented shock, and not the type of shock typically associated with drawn out equity market weakness. Just as quickly as tensions have escalated, they could rapidly de-escalate. We must keep an open mind to a variety of different scenarios, both positive and negative.

This saga likely has some way to play out yet. Tensions with China persist and negotiations with other countries are only just getting underway. There will likely be more twists and turns, so our lead investment manager, JBWere, think it is too early to say that global equity markets have bottomed yet. That said, when they were at their recent lows, equity markets had moved some way towards pricing in reasonable downside risk, to a degree that for long-term investors value was beginning to emerge.

When it has been appropriate, JBWere has been taking advantage of the opportunities presented by this market volatility. Within the MAS Schemes, JBWere have been purchasing or adding to positions in quality Australasian companies at more attractive valuations. They also used earlier strength in fixed income markets to build up some cash to provide flexibility to deploy into global equity markets when opportune moments arise. Uncertainty remains high, but MAS will continue to use our active management style to capitalise on opportunities as they arise.

We have useful online tools to help you:

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.     

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

1 As represented by the MSCI All Country World index.
2 As represented by the S&P 500 index.
3 As represented by the S&P Europe 350 index.
4 As represented by the DAX index.
5 As represented by the S&P/NZX 50 index.
6 As represented by the S&P/ASX 200 index.
7 As represented by the Bloomberg Global Aggregate index (hedged to NZ dollars)
8 As represented by the Bloomberg NZ Bond Composite 0 + Yr index.

This article is of a general nature and is not a substitute for professional and individually tailored advice. Medical Funds Management Limited, JBWere (NZ) Pty Ltd and Nikko Asset Management New Zealand Limited, their parent companies and associated entities do not guarantee the return of capital or the performance of investment funds. Returns indicated may bear no relation to future performance. The value of investments will fluctuate as the values of underlying assets rise or fall.

MAS is a financial advice provider. Our financial advice disclosure statement is available by visiting mas.co.nz or by calling 0800 800 627.

The Product Disclosure Statement for the MAS KiwiSaver Scheme is available: KiwiSaver – MAS 

The Product Disclosure Statement for the MAS Retirement Savings Scheme is available: Retirement Savings Scheme – MAS

The Product Disclosure Statement for the MAS Investment Funds is available: Investment Funds – MAS

Medical Funds Management Limited is the issuer and manager of the Schemes.