Quarterly Market Update — September 2025
The September quarter was a strong one for investors, with global share markets continuing to march higher. Progress on US trade deals, renewed optimism around artificial intelligence (AI), and central banks shifting towards easier monetary policy all helped drive markets upward.
Despite ongoing political noise and slower economic growth in some regions, investors who stayed invested were well rewarded. For diversified portfolios, the combination of strong global equities and positive bond returns resulted in one of the best quarters in recent years.
Global Shares: Developed Markets: +7.5% (hedged to NZD) / +12.9% (unhedged)
Global equities surged on the back of strong earnings from major technology names and the US Federal Reserve’s first rate cut of the cycle. The combination of easier monetary policy and continued enthusiasm around AI supported growth and momentum stocks, particularly in the US.
Japan also performed strongly as corporate reforms and solid earnings growth continued to attract global investors. European shares were more mixed, with Germany’s economy slipping into mild recession, while the UK outperformed driven by strength in healthcare and defence.
Emerging Markets: +16.6%
Emerging markets were the standout performer this quarter. A weaker US dollar boosted export competitiveness and eased debt burdens across developing economies. China led the way following progress in US-China trade talks and fresh domestic stimulus. South Korea and Taiwan also benefited from the global technology uptrend.
India was the notable laggard due to new US tariffs on key exports and weaker corporate earnings. Latin American markets were mixed, with Brazil and Mexico performing well while Argentina struggled under political uncertainty.
Trade Watch: The US administration’s push toward more aggressive trade protectionism remains a global wildcard. Tariffs have created short-term volatility, but so far markets have looked past the politics and focused on the broader trend of easier rates and improving growth prospects.
New Zealand Shares +5.8%
New Zealand’s share market rose strongly, with the NZX 50 posting its second-best quarter since 2020. Gains were driven by lower interest rates, improved global sentiment, and strength among smaller companies.
The Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate by 0.25% in August and followed up with an emergency 0.50% cut in October, taking the OCR to 2.5%, the lowest level in three years. Lower borrowing costs are beginning to filter through to households and businesses, setting the stage for improved economic growth into 2026.
Small-cap companies were the biggest winners, up 18.5% for the quarter. Heartland Group and Vulcan Steel led the NZX 50, both up more than 30%, while Fonterra, Freightways and Stride Property also posted strong gains.
Australian Shares +10.7%
Australian equities rose solidly in NZD terms. Technology and materials led the gains, while smaller companies outperformed the large-cap index by a wide margin.
Lynas Rare Earths more than doubled in value amid surging demand for critical minerals, and Life360 rose 65% following a strong earnings result. Inflation remains sticky around 3%, and the RBA paused rate cuts in response, but investor confidence remains strong.
Fixed Interest:
International Bonds: +0.9%
Global bond markets posted positive returns as investors priced in further rate cuts. The US Federal Reserve’s 0.25% reduction in September confirmed a shift in policy direction.
New Zealand Bonds: +2.9%
New Zealand bonds outperformed global peers as the RBNZ continued its easing cycle. Softer growth, cautious business confidence, and wages lagging inflation are prompting ongoing support from policymakers. Lower yields have provided solid capital gains for bondholders this quarter.
Investor Insight: The Trap of Recency Bias
Over the past few years, a handful of US tech giants such as Nvidia, Microsoft and Apple have dominated both headlines and returns. It is easy to assume those same firms will always lead markets, but history says otherwise.
Looking back 30 years, portfolios holding smaller and more diversified companies have often delivered higher long-term returns than their large-cap peers. This is a reminder that what has worked recently is not always what works next. Staying diversified and avoiding emotional, short-term decisions remains one of the most powerful ways to compound wealth over time.
Staying the Course
Periods of strong performance can tempt investors to shift into safe havens such as cash or gold, especially when headlines start hinting at what could go wrong next. While these assets can feel comfortable in the short term, history shows that timing markets rarely works.
Holding a well-diversified portfolio and staying invested through market cycles has consistently proven to be the best way to build and protect wealth over the long term.
To put that in perspective:
Over the past 20 years, global shares (hedged to NZD) have delivered positive returns in more than 75% of all quarters and achieved an annualised return of 9.7% per year, despite recessions, wars, a financial crisis, and a global pandemic.
That is the power of staying the course.