16 October 2025

 

Key takeaways over the September quarter:

  • The global share market1 extended its rally to 6 consecutive monthly gains.

  • European shares were more subdued, with the ECB pausing interest rate cuts and French political turmoil leading to a government collapse and a credit rating downgrade.

  • Interest rates were cut in the US, Australia and New Zealand, supporting equities and lifting fixed income markets.

  • New Zealand shares rose despite weak GDP data.

Below is an in-depth review of financial markets over the September quarter.

The global equity market continued its upward trend throughout the quarter, recording its sixth consecutive monthly gain in September. It wasn’t all plain sailing however, as investors navigated several potential speedbumps, including a potential US government shutdown, softer US labour market figures, ongoing tariff legal disputes, and political turbulence in Europe. Despite these headwinds, the widely anticipated US Federal Reserve interest rate cut helped underpin positive investor sentiment. The US share market2 led the way forward, gaining 8.1% (all returns are in local currency unless otherwise stated) for the quarter, marking its best September in 15 years, and pushing the index to record highs. In early October, China’s plan to tighten export controls on rare earth minerals and Trump’s retaliatory action saw volatility jump and global markets trade lower. Investors are concerned that this might spark a renewed escalation in US-China trade tensions. 

The widely anticipated US Federal Reserve (Fed) interest rate cut finally happened in September, its first since December 2024. The 0.25% reduction was a response to signs of a cooling labour market and moderating economic growth. With trade tensions continuing to simmer and inflation expected to increase, the market is now pricing in the likelihood of further cuts before the end of the year. In the US, technology and communication services were standout sectors, buoyed by robust earnings and persistent enthusiasm for the artificial intelligence (AI) theme. 

The European share market3 was more subdued, gaining 3.5% over the quarter. This reflected a mix of monetary policy caution and political developments. The European Central Bank held its main policy rate steady at 2.0%, pausing after a series of cuts earlier in the year. Also weighing on sentiment was the ongoing political drama in France. This escalated with the collapse of the French government resulting in a subsequent credit rating downgrade. Trade tensions with the US continued to capture news headlines as a new 15% tariff on most European goods came into effect. This perhaps helped balance investor sentiment given the initial proposed tariff was set at 30%.  

Closer to home, central bank action provided a tailwind for Australasian share markets. Both the Reserve Bank of Australia and the Reserve Bank of New Zealand cut their benchmark rates by 0.25% in August, supporting equities and lifting fixed income markets. The Australian share market4 performed well over the quarter gaining 4.7%, however, it noticeably lagged global peers in September, declining 0.8% for the month. Over September, losses were reported from 9 out of 11 sectors, with energy the weakest with a drop of nearly 10%. 

The New Zealand equity market5 extended its recent gains, finishing up 5.5% for the quarter. The run higher was supported by declines in interest rates and individual company announcements. This occurred despite a still challenging economic backdrop. Data released in September showed New Zealand’s GDP contracted by 0.9% in the June quarter, marking the third decline in the last 5 quarters. In response, the Reserve Bank of New Zealand took decisive action in October, cutting the Official Cash Rate by 0.50% to 2.5%. This move was broadly welcomed by households and businesses. 

With central banks around the world generally tending to favour a more accommodative stance, fixed interest yields generally declined over the quarter. US 2-year Treasury yields fell to 3.60%, while the 10-year eased to 4.15%. In New Zealand, the 2-year government bond yield dropped to 2.72%, and the 10-year finished at 4.21%. 

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

Returns of selected major markets to 30 September 2025

Note: Returns are in local currency terms.

 

The outlook

Global macroeconomic conditions have improved compared to earlier concerns, with solid growth and upward revisions for the US, Europe and China over recent months. Additionally, the US Federal Reserve has resumed monetary easing in response to a softer labour market, and further rate cuts are anticipated. Historically, such easing without recession has benefited risk assets like shares. On top of this, AI continues to drive market enthusiasm, attracting investment and transforming not only tech but also related industries and traditional sectors. This momentum, combined with easing monetary policy, underpins a constructive outlook for global share markets.

Perhaps the biggest challenge is that much of this positive news is already now well understood by markets. Embedded expectations are high and US equity valuations are elevated, reducing safety margins and placing greater onus on companies to deliver. Persistent macro risks, such as soft labour markets, trade disruptions, tariffs and policy uncertainties, also add complexity. While our lead investment manager, JBWere, sees the foundations for continued global share market resilience, the above factors temper their optimism modestly. Ultimately, JBWere sees risk-reward as relatively balanced, supporting the neutral tactical stance towards global shares versus strategic asset allocation targets.

Locally, despite current economic sluggishness, a recovery is expected as the RBNZ accelerates rate cuts. The weaker NZ dollar and strong rural incomes are supporting domestic conditions. JBWere believe conditions are in place for further solid performance from the local equity market.

Through all the twists and turns in markets this year, JBWere’s approach to portfolio management has not changed. Elevated uncertainty and obvious catalysts for further market volatility just reinforce the need to maintain good investment and portfolio construction discipline. This is the focus within the MAS Schemes, where our active management style allows us to regularly test and adjust conviction levels when deemed necessary. The economic and market landscape is constantly evolving. But through strong diversification and their exposures to high-quality investments, we believe the MAS Schemes are well positioned to weather what could be in store next.

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 Euro Stoxx 600 Index.
4 As represented by the S&P/ASX 200 Index.
5 As represented by the S&P/NZX 50 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

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