A month of two halves
The first half of April was dominated by the war in Iran. As the conflict intensified, there were real concerns about supply disruptions through the Strait of Hormuz. Oil prices jumped, pushing up fuel costs and inflation expectations across developed markets. The dominant view was that growth would slow while inflation stayed high.
The second half of the month told a different story. A fragile but holding truce saw markets respond quickly. The S&P 500 rallied strongly to a new high, even though most individual companies are still trading well below their own recent peaks.
It’s been a narrow rally. Semiconductor stocks have surged, along with the ‘magnificent 7’ large US technology companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla), while much of the broader market has moved sideways. Investment has continued to concentrate in areas linked to AI infrastructure, supported by strong spending outlooks from the largest tech companies.
How the funds performed
Our global funds had an outstanding month, posting returns of close to 10%. Exposure to semiconductors, selected large technology companies and AI infrastructure drove most of the gains. Energy holdings also helped earlier in the month before oil prices eased.
Our Australasian strategies were positive as well, but to a lesser extent. Both New Zealand and Australia are feeling the impact of higher fuel costs and more persistent inflation, which is keeping interest rates higher for longer than in the US or Europe.
Higher fuel prices are flowing through to household spending, and that has weighed on retailers, housing-related companies and other domestically focused businesses. While our focus on higher-quality companies has helped, it remains a more challenging environment locally than in global markets, particularly compared to large US technology stocks.
What we’re watching
First, whether the current truce holds. Any renewed disruption in the Middle East, particularly around key shipping routes, could quickly reverse some of April’s gains.
Second, how broad the market rally becomes. At the moment, gains are concentrated in a relatively small group of companies. Over time, this usually changes - either more companies start to participate, or the leaders lose momentum. Both can lead to more volatility.
We remain comfortable with our exposure to AI-related businesses where earnings support it, but we are being disciplined about how much we invest in any one position.
Third, the outlook for interest rates locally. A clearer path to rate cuts in New Zealand and Australia - likely once fuel-driven inflation eases - would support parts of the market that have lagged. We have been gradually increasing exposure to high-quality domestic companies that should benefit from that shift.
Where this leaves portfolios
Our global portfolios enter May in a strong position, while recognising that much of the good news is already reflected in the share prices of leading AI companies.
Our Australasian portfolios are positioned for a slower recovery, with a focus on companies with strong balance sheets and the ability to maintain pricing.
We have not chased the late surge in markets. Instead, we used April’s strength to take some profits and reinvest into areas where we see better long term value.
Our focus
Our focus remains on building portfolios that can perform through different market conditions, rather than trying to predict every headline. April was a reminder that some of the strongest market periods can come when the news flow feels at its worst.
If you have any questions or concerns about your portfolio, our team is here to help. Please don’t hesitate to get in touch – our contact details can be found
here.
Thank you for your continued trust.