Your quarterly market commentary

Quarterly Market Update: 31 March 2025

The first three months of 2025 was a period where returns were mixed across the various investment markets within our AMP funds.  In this update, we summarise the major changes in markets and economies since the start of the year, and provide some insight into how AMP is managing your investments and savings amid some interesting times.

Market Summary

United States: The US sharemarket experienced a decline in the first quarter following two consecutive years of gains exceeding 20 per cent. The year began on a strong note, with the S&P 500 reaching a new all-time high in mid-February. However, sentiment shifted late in February due to rising policy uncertainty in Washington, leading to a decline in the S&P 500 by the end of the quarter. Early in April, President Trump announced unexpected tariff measures, which further unsettled investors and led to additional market declines.

Europe: On the other hand, European markets saw a boost thanks to Germany's new spending plans and a more positive business outlook. Sharemarkets rallied, particularly in Germany, due to optimism around the new administration. The European Central Bank cut interest rates twice, and UK shares performed well. 

Emerging Markets: Emerging markets had a good quarter, with the MSCI Emerging Market index gaining ground. Eastern Europe and China did well, driven by positive economic outlooks and AI optimism. Brazil and South Africa also saw gains, while India and Taiwan struggled somewhat.

Asian markets outside Japan saw modest gains, led by China, Singapore, and South Korea. China’s government stimulus measures helped stabilize the economy, but Taiwan and India faced declines due to trade concerns.

New Zealand: In New Zealand, GDP growth posted for the last quarter of 2024 had a positive uptick, technically bringing the country out of recession. The Reserve Bank of New Zealand started cutting interest rates and the market is now expecting a neutral official cash rate from the Reserve Bank to be around three per cent.  However, the NZ sharemarket was one of the lower performing markets around the world in the first three months of the year.

How is AMP positioning portfolios during this period?

One of the big global themes we have been thinking about for some time is geopolitical fragmentation and economic competition.  We’ve been tracking this theme since the commencement of the Ukraine war and the strategic competition between the US and China increased.  Globalisation is being rewired as the world splits into competing blocs.

Over the past two years, we have been gradually bringing even more diversification into the AMP diversified funds, as we have considered the changing geopolitical landscape, as well as other themes such as digital disruption and AI, changing global demographics and climate change.  

Equities: Last year we shifted some allocation from developed market equities, like the US, to emerging markets and listed infrastructure and a small allocation to direct infrastructure.  Considering tariffs and the effects of deglobalisation, we think these factors are inflationary over the medium and long-term horizon.  Even before the Trump administration and the introduction of tariffs, we were already concerned about persistent inflation and higher-for-longer interest rates.  The addition of trade wars and tariffs has only heightened this concern. 

Fixed income: Previously, we added NZ and US inflation linked bonds to the AMP diversified funds, which have outperformed nominal bonds on a year-to-date basis.  This move was to increase the diversification and granularity of fixed income exposures.

These particular moves continued to deliver strong returns when the market was going up, but importantly, they are now providing additional diversification during this current period of volatility.

We review our mix annually, at a minimum: We have just reviewed our asset allocations for the AMP diversified funds – that is, the mix between shares, bonds, cash and infrastructure, as well as our mix between countries and geographies.

At this point in time, we do not believe we need to make major changes to our current allocations, primarily because our diversified funds are already positioned well with increased diversification that we have added over the past couple of years.

We are seeing further diversification opportunity in adding more to high yield bonds, and we see keeping our growth allocation at benchmark level as sensible, given the heightened level of uncertainty.  Our changes are likely to be modest because we have already made changes that will help us, based on a longer-term view of the global economy and markets.

What we’re watching: We are paying close attention to the global impacts of tariffs and trade wars.  If needed, we will make further changes to our asset allocations as required, based on our view on where we believe markets will be looking out 5-years from now.  With economic and investment forecasts, the further you look out, the more confident you can be with the view.  Trying to predict what will happen in the next few months, or the next year, comes with a lot more unpredictability, therefore increased risk of getting those calls wrong.

Diversification remains key: Our investment philosophy and investment strategy is designed to maximise the benefits of diversification.  We think we probably have the most diversified funds in the KiwiSaver market – today, the AMP KiwiSaver Balanced Fund has approximately 6,800 individual holdings in it.  A search on portfolio holdings of diversified funds within KiwiSaver funds in the market shows varying levels of diversification, but the AMP funds compare very well.  Right now, we’re happy we have this increased diversification to help our customers.  When markets are volatile, diversification is your best friend.

In summary

Global equity market volatility can be challenging, but investors who stay the course and adhere to sound investment principles are more likely to achieve their long-term goals.  By maintaining a long-term perspective, diversifying investments, rebalancing portfolios, and seeking financial advice, investors can navigate the turbulence with confidence. Ultimately, staying the course amid market volatility is about trusting in the resilience of markets and the power of a well-executed investment strategy.

Thank you for reading our market commentaries. For help or advice with your savings or investments goals, please contact your adviser or our team at AMP.

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Following our live webinar on 10 April, we share the top eight questions asked by our members, along with answers from our experts.
The full webinar recording is also available on this page.