A strong July for markets and Pie clients
July wraps up another incredibly strong month for markets, which has been especially favourable to Pie Funds clients. Two of our funds were up over 7%, reflecting the strength of this rally and our positioning within it.
Before unpacking the month’s market activity, it’s worth celebrating two major milestones:
Thank you to all our clients, especially those who’ve been with us since the early days; it’s hugely satisfying to reward your loyalty with these strong returns.
Retail investors drive a new market dynamic
Turning back to the markets, the recent rally seems to have been embraced by US retail investors far more than institutional investors, who remain somewhat sceptical of the current macroeconomic environment.
Retail enthusiasm could potentially be reshaping markets. In the past few years, there’s been a fascination with acronyms like FAANG to describe the major tech stocks, and ‘meme stocks’ to cover stocks like GameStop which gain popularity through social media.
Now we have new acronyms like DORK, which includes Krispy Kreme (doughnut stores), Opendoor (online real estate), Rocket Lab (no explanation needed!), and Kohl’s (traditional department stores). During the month of July, the price of Opendoor rose by over 500% before falling back. Are retail investors now so dominant that they’re the price setters?
The inflation question lingers
Despite the US retail frenzy, institutional investors are still sitting on the fence as to whether this rally is enduring or needs to correct.
The chief concern of institutional investors is, what impact will the tariffs have on inflation and consumer spending? Fed Chair Powell wants to wait and see before considering lowering interest rates. Higher inflation is not what the market or the US President wants, and lowering interest rates is really dependent on that inflation number (regardless of who the Fed chair is). The US government wants lower interest rates to fund its deficits and mounting debt bill.
The announcement of trade deals with the majority of America’s key trading partners during July meant that markets cheered news of a perceived ‘truce’ in the trade war.
However, as the month ended, President Trump shattered that illusion by updating tariff levels for the remaining countries, including New Zealand, many of whom saw their tariff rate actually rise from the April 2 ‘liberation day’ figure. According to Budget Lab at Yale University the effective tariff rate for US consumers is now 18.3%, up from 2.4% in 2024 and the highest since the 1930's.* At the end of the day, someone, somewhere, will have to pay the cost of this.
AI spend is a global stimulus
I’ve also been reminded this month of the level of AI infrastructure spending taking place globally, dominated by the US tech giants.
Global AI infrastructure spend is estimated to be over US$632 billion, which in essence is a giant stimulus package and, I think, one of the major reasons why US and, for that matter, global growth is holding up in 2025.
It’s pretty hard to have a recession with this kind of tailwind. In fact, according to Renaissance Macro Research, capital investments in AI have contributed more to America's GDP growth in the past two quarters than all consumer spending.**
Looking forward: digesting gains and staying optimistic
Where to from here after such a strong run?
Well, with a very growth-focused US administration, and a strong tech sector with significant infrastructure spend, it’s hard to get too negative, even though valuations are elevated and trade uncertainty remains.
But, if AI is to create the type of productivity gains that have been suggested, then we are still in the early stages of this boom.
So whilst markets probably need to digest these gains - and another round of tariff uncertainty is the perfect catalyst for this - research from Carson Investment Research shows that after the US S&P 500 has made new highs, 82% of the time it goes on to make new highs one year later.*** These are good odds.
*Source: budgetlab.yale.edu, August 2025
**Source: datacenterdynamics.com, August 2025
***Source: carsonwealth.com, July 2025
Information is current as at 31 July 2025. Pie Funds Management Limited ("Pie Funds") is the manager and issuer of the funds in the Pie Funds Management Scheme and Pie KiwiSaver Scheme (the Schemes). Any advice is given by Pie Funds and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Schemes' investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statements for the Schemes, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary. The information is given in good faith and has been derived from sources believed to be reliable and accurate. However, neither Pie Funds nor any of its employees or directors gives any warranty of reliability or accuracy and shall not be liable for errors or omissions herein, or any loss or damage sustained by any person relying on such information, whatever the cause of loss or damage. No person, including the directors of Pie Funds, guarantees the repayment of units in the Schemes or any returns of units in the Schemes.