The second quarter of 2025 started with elevated volatility due to the Trump administration’s ‘Liberation Day’ tariff announcements. However, global shares ultimately delivered significant gains as the markets perceived that the strong rhetoric on Liberation Day might not be matched by the eventual (delayed) tariff implementation.
Almost all share markets followed a similar pattern this quarter, first weakening in early April due to tariff announcements, before rebounding throughout the rest of the quarter. Emerging markets and Australian shares led the pack, delivering excellent gains, with developed markets lagging but still posting a strong quarter. This pattern reflected the almost singular focus of global markets on international trade policy developments over the quarter.
Most bond markets posted gains, with yields marginally lower across most major markets. Generally, yield curves steepened with longer-dated bond yields falling less than their shorter-dated counterparts.
International shares
+ 9.3% (hedged to NZD)
+ 3.8% (unhedged)
Developed share markets enjoyed a strong second quarter of 2025, primarily driven by reduced trade pressure as several countries appeared to make progress on trade deals with the US.
The US market had a strong quarter, with Information Technology and Communication Services leading the way as investors regained their appetite for ‘Magnificent Seven’ stocks and the artificial intelligence theme. The second quarter also saw several positive economic developments and a strong corporate earnings season, further boosting performance. Despite ongoing pressure from the Trump administration to cut interest rates, the US Federal Reserve continued to hold the Federal Funds rate steady at 4.25% – 4.5%. While opinions vary on the timing of future interest rate cuts, most committee members agree that there will be further cuts.
The Japanese share market had a strong second quarter following an initial sharp drop due to the Trump administration’s ‘reciprocal’ tariff announcements. Since then, progress on trade deals with China and other key trading partners has eased recession fears and led to a strong recovery, with the Nikkei 225 Index up +13.6% for the quarter.
Eurozone markets also made gains in the second quarter, with the S&P Europe 350 Index rallying +0.8% in local currency terms. Europe’s rearmament campaign has begun to stall, with the agreement at the recent NATO summit for countries to lift defence spending running into a headwind called ‘European fiscal reality’.
The US dollar was significantly weaker throughout the quarter, resulting in noticeably higher reported returns for investors holding hedged foreign assets.
Source: MSCI World ex-Australia Index (net div.)
Emerging markets shares
+4.5%
Emerging markets shares (unhedged) led their developed market counterparts in the second quarter of 2025, with the MSCI Emerging Markets Index posting a +4.5% gain. Major markets like China lagged the group while Korea, Taiwan and Latin America roared higher.
Chinese markets posted tepid gains after a volatile second quarter. China was a primary target of the Trump administration’s ‘Liberation Day’ tariffs, which led to a sharp drop in April. While a temporary truce was announced in May to allow for negotiations, by June, Chinese shipments to the US had plunged by 35% putting export-driven sectors under pressure. Large technology companies listed in Hong Kong outperformed mainland China shares as the tech theme returned to favour.
India ended its losing streak in the second quarter, with the Nifty 50 Index up +8.5%. While this marks a strong turn in momentum for the Indian stock market, it still lags behind other emerging markets, such as Taiwan, which has stronger growth prospects tied to the artificial intelligence theme.
South Korea posted strong double-digit returns in the second quarter as political instability subsided following the election of a new president in early June. Taiwan posted robust gains, continuing to benefit from positive investor sentiment for artificial intelligence. Taiwan Semiconductor Manufacturing Company (TSMC) reported double-digit returns for the quarter, and given that it accounts for 30% of the Taiwanese stock market, this is a significant driver of returns.
Latin American equities delivered an exceptional quarter, with the S&P Latin America 40 Index rising +13.9%. Mexican and Brazilian shares primarily drove gains, while the indices of Chile and Peru also posted robust gains. All sectors in Latin America gained, except for Energy, with technology-heavy sectors Information Technology, Consumer Discretionary and Communication Services, leading the charge, all up around +30%.
Source: MSCI Emerging Markets Index (gross div.)
New Zealand shares
+2.8%
New Zealand’s S&P/NZX 50 Index was up in the second quarter of 2025 but is still trading below its 2024 all-time high.
After a sharp drop at the beginning of the quarter, in concert with global markets, NZ shares had a strong recovery in May, before trading sideways for the remainder of the quarter.
The Reserve Bank of New Zealand (RBNZ) continued its interest rate-cutting cycle throughout the quarter, with the Official Cash Rate (OCR) now sitting at 3.25%. This has supported the NZ economy, as lower borrowing costs increase disposable income for consumers and business investment. The path forward for interest rates is uncertain and may depend on the impact of global trade disputes on NZ growth and inflation. This is likely to remain uncertain for some time, but the RBNZ believes that the current OCR is in ‘neutral’ territory, meaning further changes will largely be dependent on incoming economic data.
Manawa Energy led the pack in the S&P/NZX 50 Index this quarter, rising +27.6% following an acquisition by Contact Energy at a premium to the trading price at the announcement date.
Other winners for the quarter included Tourism Holdings (+27.1%) and Turners Automotive Group (+21.7%).
On the other side of the ledger, Vulcan Steel, KMD Brands and SkyCity Entertainment all lost around 25%, steadily declining throughout the quarter.
Source: S&P/NZX 50 Index (gross with imputation credits)
Australian shares
+7.4%
The Australian share market had a fantastic second quarter, with the S&P/ASX 200 Index rising +7.4%. After a rocky start, the market steadily increased through May and June, reaching new record highs previously set earlier this year.
The Reserve Bank of Australia (RBA) continued its interest rate-cutting cycle in the second quarter, with a 0.25% cut in May, bringing the cash rate to 3.85%. The RBA maintains that low and stable inflation is its priority, and in an uncertain environment, it will move cautiously in cutting interest rates, even as inflation continues to fall. This stance was reinforced by its decision to maintain the rate at 3.85% at the July 7 meeting last week.
All sectors except Materials reported gains, with Information Technology leading the pack, posting a +28.4% gain, and Financials coming in second with a +15.8% gain.
JB Hi-Fi Ltd and Cochlear Ltd were the two biggest winners among the largest 50 Australian companies, up +47.5% and +34.2% respectively. On the downside, the worst performer was Sonic Healthcare Ltd, down 9.6% for the quarter. Notably, only five of the top 50 companies posted losses for the quarter.
With the Australian dollar slightly weaker against the New Zealand dollar over the quarter, the reported returns to New Zealand investors were marginally lower than the reported index returns.
Source: S&P/ASX 200 Index (total return)
International fixed interest
+1.2%
The second quarter of 2025 saw yield curves steepen marginally, although overall, yields were relatively stable.
US Treasury markets had a busy quarter. Longer dated bond yields rose, reflecting growing concerns over the US debt, federal deficit and the impact of protectionist trade policies. Meanwhile, shorter dated US bond yields fell after weakening economic data led the US Federal Reserve to adopt a more cautious tone. Despite a few committee members becoming more cautious, Federal Reserve Chairman Jerome Powell reiterated his ‘wait and see’ approach to interest rate cuts. Markets are currently anticipating around 0.65% of additional rate cuts by the end of 2025.
The US 10-year bond yield rose from 4.21% to 4.23% during the quarter, with the two-year bond moving from 4.03% to 3.97%, maintaining a positive yield premium for longer duration bonds. The Japanese 10-year fell from 1.47% to 1.43% and key European rates in Germany, Italy and France fell around 0.15%.
With trade policy fears increasing economic uncertainty, the European Central Bank reduced interest rates twice, in April and June, to close out the quarter around 2%.
The FTSE World Government Bond Index 1-5 Years (hedged to NZD) was up +1.2% over the quarter, while the broader Bloomberg Global Aggregate Bond Index (hedged to NZD) rose +1.3%.
Source: FTSE World Government Bond Index 1-5 Years (hedged to NZD)
New Zealand fixed interest
+1.3%
The Reserve Bank of New Zealand (RBNZ) cut New Zealand’s Official Cash Rate (OCR) by another 0.50% to 3.25% in the second quarter.
The key focus for the RBNZ remains on global and domestic growth fears, as the New Zealand economy’s recovery continues to move slowly, and US trade protectionist policies raise additional risks from abroad.
On the back of a mixed global bond market, the New Zealand 10-year bond was down slightly, moving from 4.59% to 4.56%.
The S&P/NZX A-Grade Corporate Bond Index gained +1.3% for the quarter, while the longer duration but higher quality S&P/NZX NZ Government Bond Index gained +1.5%.
Source: S&P/NZX A-Grade Corporate Bond Index
Unless otherwise specified, all returns are expressed in NZD. We assume Australian shares and emerging markets shares are invested on an unhedged basis, and therefore reported returns from these asset classes are susceptible to movement in the value of the NZD. Index returns are before all costs and tax. Returns are annualised for time periods greater than one year.
2025 Q2 – Key Market Movements
The second quarter of 2025 started with elevated volatility due to the Trump administration’s ‘Liberation Day’ tariff announcements. However, global shares ultimately delivered significant gains as the markets perceived that the strong rhetoric on Liberation Day might not be matched by the eventual (delayed) tariff implementation.
Almost all share markets followed a similar pattern this quarter, first weakening in early April due to tariff announcements, before rebounding throughout the rest of the quarter. Emerging markets and Australian shares led the pack, delivering excellent gains, with developed markets lagging but still posting a strong quarter. This pattern reflected the almost singular focus of global markets on international trade policy developments over the quarter.
Most bond markets posted gains, with yields marginally lower across most major markets. Generally, yield curves steepened with longer-dated bond yields falling less than their shorter-dated counterparts.
International shares
+ 9.3% (hedged to NZD)
+ 3.8% (unhedged)
Developed share markets enjoyed a strong second quarter of 2025, primarily driven by reduced trade pressure as several countries appeared to make progress on trade deals with the US.
The US market had a strong quarter, with Information Technology and Communication Services leading the way as investors regained their appetite for ‘Magnificent Seven’ stocks and the artificial intelligence theme. The second quarter also saw several positive economic developments and a strong corporate earnings season, further boosting performance. Despite ongoing pressure from the Trump administration to cut interest rates, the US Federal Reserve continued to hold the Federal Funds rate steady at 4.25% – 4.5%. While opinions vary on the timing of future interest rate cuts, most committee members agree that there will be further cuts.
The Japanese share market had a strong second quarter following an initial sharp drop due to the Trump administration’s ‘reciprocal’ tariff announcements. Since then, progress on trade deals with China and other key trading partners has eased recession fears and led to a strong recovery, with the Nikkei 225 Index up +13.6% for the quarter.
Eurozone markets also made gains in the second quarter, with the S&P Europe 350 Index rallying +0.8% in local currency terms. Europe’s rearmament campaign has begun to stall, with the agreement at the recent NATO summit for countries to lift defence spending running into a headwind called ‘European fiscal reality’.
The US dollar was significantly weaker throughout the quarter, resulting in noticeably higher reported returns for investors holding hedged foreign assets.
Source: MSCI World ex-Australia Index (net div.)
Emerging markets shares
+4.5%
Emerging markets shares (unhedged) led their developed market counterparts in the second quarter of 2025, with the MSCI Emerging Markets Index posting a +4.5% gain. Major markets like China lagged the group while Korea, Taiwan and Latin America roared higher.
Chinese markets posted tepid gains after a volatile second quarter. China was a primary target of the Trump administration’s ‘Liberation Day’ tariffs, which led to a sharp drop in April. While a temporary truce was announced in May to allow for negotiations, by June, Chinese shipments to the US had plunged by 35% putting export-driven sectors under pressure. Large technology companies listed in Hong Kong outperformed mainland China shares as the tech theme returned to favour.
India ended its losing streak in the second quarter, with the Nifty 50 Index up +8.5%. While this marks a strong turn in momentum for the Indian stock market, it still lags behind other emerging markets, such as Taiwan, which has stronger growth prospects tied to the artificial intelligence theme.
South Korea posted strong double-digit returns in the second quarter as political instability subsided following the election of a new president in early June. Taiwan posted robust gains, continuing to benefit from positive investor sentiment for artificial intelligence. Taiwan Semiconductor Manufacturing Company (TSMC) reported double-digit returns for the quarter, and given that it accounts for 30% of the Taiwanese stock market, this is a significant driver of returns.
Latin American equities delivered an exceptional quarter, with the S&P Latin America 40 Index rising +13.9%. Mexican and Brazilian shares primarily drove gains, while the indices of Chile and Peru also posted robust gains. All sectors in Latin America gained, except for Energy, with technology-heavy sectors Information Technology, Consumer Discretionary and Communication Services, leading the charge, all up around +30%.
Source: MSCI Emerging Markets Index (gross div.)
New Zealand shares
+2.8%
New Zealand’s S&P/NZX 50 Index was up in the second quarter of 2025 but is still trading below its 2024 all-time high.
After a sharp drop at the beginning of the quarter, in concert with global markets, NZ shares had a strong recovery in May, before trading sideways for the remainder of the quarter.
The Reserve Bank of New Zealand (RBNZ) continued its interest rate-cutting cycle throughout the quarter, with the Official Cash Rate (OCR) now sitting at 3.25%. This has supported the NZ economy, as lower borrowing costs increase disposable income for consumers and business investment. The path forward for interest rates is uncertain and may depend on the impact of global trade disputes on NZ growth and inflation. This is likely to remain uncertain for some time, but the RBNZ believes that the current OCR is in ‘neutral’ territory, meaning further changes will largely be dependent on incoming economic data.
Manawa Energy led the pack in the S&P/NZX 50 Index this quarter, rising +27.6% following an acquisition by Contact Energy at a premium to the trading price at the announcement date.
Other winners for the quarter included Tourism Holdings (+27.1%) and Turners Automotive Group (+21.7%).
On the other side of the ledger, Vulcan Steel, KMD Brands and SkyCity Entertainment all lost around 25%, steadily declining throughout the quarter.
Source: S&P/NZX 50 Index (gross with imputation credits)
Australian shares
+7.4%
The Australian share market had a fantastic second quarter, with the S&P/ASX 200 Index rising +7.4%. After a rocky start, the market steadily increased through May and June, reaching new record highs previously set earlier this year.
The Reserve Bank of Australia (RBA) continued its interest rate-cutting cycle in the second quarter, with a 0.25% cut in May, bringing the cash rate to 3.85%. The RBA maintains that low and stable inflation is its priority, and in an uncertain environment, it will move cautiously in cutting interest rates, even as inflation continues to fall. This stance was reinforced by its decision to maintain the rate at 3.85% at the July 7 meeting last week.
All sectors except Materials reported gains, with Information Technology leading the pack, posting a +28.4% gain, and Financials coming in second with a +15.8% gain.
JB Hi-Fi Ltd and Cochlear Ltd were the two biggest winners among the largest 50 Australian companies, up +47.5% and +34.2% respectively. On the downside, the worst performer was Sonic Healthcare Ltd, down 9.6% for the quarter. Notably, only five of the top 50 companies posted losses for the quarter.
With the Australian dollar slightly weaker against the New Zealand dollar over the quarter, the reported returns to New Zealand investors were marginally lower than the reported index returns.
Source: S&P/ASX 200 Index (total return)
International fixed interest
+1.2%
The second quarter of 2025 saw yield curves steepen marginally, although overall, yields were relatively stable.
US Treasury markets had a busy quarter. Longer dated bond yields rose, reflecting growing concerns over the US debt, federal deficit and the impact of protectionist trade policies. Meanwhile, shorter dated US bond yields fell after weakening economic data led the US Federal Reserve to adopt a more cautious tone. Despite a few committee members becoming more cautious, Federal Reserve Chairman Jerome Powell reiterated his ‘wait and see’ approach to interest rate cuts. Markets are currently anticipating around 0.65% of additional rate cuts by the end of 2025.
The US 10-year bond yield rose from 4.21% to 4.23% during the quarter, with the two-year bond moving from 4.03% to 3.97%, maintaining a positive yield premium for longer duration bonds. The Japanese 10-year fell from 1.47% to 1.43% and key European rates in Germany, Italy and France fell around 0.15%.
With trade policy fears increasing economic uncertainty, the European Central Bank reduced interest rates twice, in April and June, to close out the quarter around 2%.
The FTSE World Government Bond Index 1-5 Years (hedged to NZD) was up +1.2% over the quarter, while the broader Bloomberg Global Aggregate Bond Index (hedged to NZD) rose +1.3%.
Source: FTSE World Government Bond Index 1-5 Years (hedged to NZD)
New Zealand fixed interest
+1.3%
The Reserve Bank of New Zealand (RBNZ) cut New Zealand’s Official Cash Rate (OCR) by another 0.50% to 3.25% in the second quarter.
The key focus for the RBNZ remains on global and domestic growth fears, as the New Zealand economy’s recovery continues to move slowly, and US trade protectionist policies raise additional risks from abroad.
On the back of a mixed global bond market, the New Zealand 10-year bond was down slightly, moving from 4.59% to 4.56%.
The S&P/NZX A-Grade Corporate Bond Index gained +1.3% for the quarter, while the longer duration but higher quality S&P/NZX NZ Government Bond Index gained +1.5%.
Source: S&P/NZX A-Grade Corporate Bond Index
Unless otherwise specified, all returns are expressed in NZD. We assume Australian shares and emerging markets shares are invested on an unhedged basis, and therefore reported returns from these asset classes are susceptible to movement in the value of the NZD. Index returns are before all costs and tax. Returns are annualised for time periods greater than one year.
Article provided by Consilium.
No results found.
Share This Post