Market Commentary for the quarter ended 30 September 2026

The third quarter of 2026 brought a mix of cautious optimism and ongoing uncertainty for New Zealand investors.

New Zealand shares rose 1.9%, which was broadly in line with overseas shares. The strongest lift came from consumer discretionary stocks, which jumped 15.0% after some companies delivered better-than-expected earnings. The energy sector also had a very strong quarter, rising 14.5%, helped by higher energy prices after conflict in the Middle East pushed oil and other fuel costs up. Not every sector benefited, though — financials were the weakest performer, falling 5.1%.

Overseas markets also performed reasonably well, with global shares up 1.8% in local currency terms. Again, energy was the standout, while utilities were the weakest sector, down 9.3%. Emerging markets rose only slightly, with some areas weighed down by weakness in technology-heavy parts of Asia.

Not all investments did well. Bonds fell in value over the quarter as bond yields moved higher. New Zealand sovereign bonds dropped 2.6%, while overseas sovereign bonds also declined as several central banks around the world raised interest rates, which tends to put pressure on bond prices.

Other interest-rate-sensitive assets were also under pressure. Listed property fell 6.7% and listed infrastructure dropped 7.0%. These types of investments usually struggle when borrowing costs rise.

The New Zealand dollar weakened slightly, falling 0.8% against the US dollar and 1.2% against the Australian dollar. During the quarter, the NZD had risen strongly against the USD before slipping back again.

What was happening in the economy?

New Zealand’s economy showed signs of recovery, but it is not fully back on its feet yet.

The Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate twice, taking it to 2.75%. Inflation is still above target, partly because higher fuel prices have fed through into the economy. Even so, the RBNZ may pause before lifting rates again, possibly waiting until December to see how the earlier increases are affecting the economy.

The good news is that growth is improving. GDP rose 0.2% in the June quarter and 2.6% over the year, both better than expected. But the economy still has some spare capacity, and unemployment was 5.6%. That suggests the recovery is real, but not yet strong enough to remove all pressure on households and businesses.

The housing market also remained soft. The Cotality home value index, which tracks housing market conditions including home values, rents, and broader market trends, fell 1.3% in the quarter. Home values are now about 19% below their peak, with prices at their lowest level since 2021.

Internationally, central banks stayed focused on inflation. The US Federal Reserve raised rates by 25 basis points, and other major central banks also kept a tight stance. Continued tensions in the Middle East and higher energy prices are reasons inflation may stay sticky for some time.

What does the outlook look like?

For New Zealand, the economy appears to be recovering, but growth is still uneven. Inflation remains a concern, unemployment is still relatively high, and global uncertainty could affect energy prices and confidence.

Globally, the AI investment boom is expected to support growth. However, inflation may remain above target, which means central banks are likely to stay cautious.

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^{29 October 2026}