Market Commentary for the quarter ended 30 June 2026

Markets navigated a turbulent backdrop shaped by conflict in the Middle East and ongoing inflation, yet delivered one of the strongest equity rallies in years. Oil prices spiked in excess of US$140 per barrel in early April before a ceasefire on 7 April brought gradual relief, with prices falling nearly 50% through June. This oil shock drove inflation higher globally, prompting the European Central Bank and Bank of Japan to raise interest rates by 0.25% each in June, while the US Federal Reserve (the Fed) held steady. Despite this uncertainty, equity markets surged on exceptional corporate earnings and a major investment boom in artificial intelligence (AI) infrastructure, creating a striking disconnect between geopolitical risk and market optimism.

New Zealand shares

New Zealand equities gained 5.6% over the quarter. The Reserve Bank of New Zealand (RBNZ) held the Official Cash Rate at 2.25% throughout the quarter, providing stability despite persistent inflation running above the 1–3% target range, at 3.1%. Economic growth remained solid, with first-quarter GDP rising 0.8%, and the ANZ business confidence survey improving sharply in June to its highest level since February. However, services and manufacturing activity continued to contract, reflecting cautious business sentiment.

Overseas shares

Overseas equities surged 14.0% as companies delivered exceptional earnings growth and major technology firms announced massive investment plans. Corporate earnings estimates for the quarter rose, with 85% of companies ahead of expectations in the quarter ended 30 March 2026. Mega-Cap technology companies committed around US$700 billion in spending for 2026, with 75% directed toward AI infrastructure, driving enthusiasm about the technology’s growth potential. The easing of Middle East tensions as oil prices fell also boosted investor sentiment.

Emerging market shares

Emerging market equities delivered their best quarterly performance since 2009 with a gain of 24.4%, driven primarily by Korean and Taiwanese semiconductor companies. SK Hynix (a chip manufacturing company) reported first-quarter revenue growth of 198% compared to the prior year, while Samsung’s profits surged, sending both companies’ share prices soaring. South Korean equities rose 88% and Taiwanese markets gained 49%, far outpacing other regions. This performance was concentrated in companies supplying components for AI systems, as demand for specialised chips and memory used in AI accelerated.

Listed property

Listed property rose 8.5% as stable US interest rates and supply constraints supported valuations. The Fed held interest rates steady at 3.50–3.75% for the fourth consecutive meeting, providing a stable environment for property investors. Lodging and resort properties led the sector, benefiting from strong travel demand and limited new supply. In contrast, residential and mortgage-backed property investments posted modest gains or slight declines.

Listed infrastructure

Listed infrastructure gained 2.3%, posting modest returns relative to the broader market surge. Growing demand for data centres to support AI created investment opportunities. The Middle East conflict also initially pressured energy-related infrastructure before easing through June. The sector’s muted performance reflects infrastructure’s more limited exposure to the AI boom compared to broader share markets.

Global bonds

Global fixed interest was essentially flat with a gain of 1.0%, as differing central bank policies and rising yields (i.e. bonds losses) in developed market debt offset gains in emerging market debt. The European Central Bank and Bank of Japan both raised rates by 0.25% in June, while the Fed held steady, creating regional differences. Emerging market bonds outperformed, with gains around 4.0% as inflation outlooks improved. The near-flat result reflected the challenge for bond investors when major central banks are either raising rates or keeping them elevated due to stubborn inflation.

New Zealand government bonds

New Zealand sovereign bonds gained 3.2% despite increasingly firm language from the RBNZ about future rate increases. Inflation remained above target at 3.1% with forecasts for a peak around 4.3% in the third quarter of 2026. The positive return indicated investors were weighing expectations of easing inflationary pressures against the central bank’s hawkish stance.

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