Investment Insights October 2025

New Zealand’s economic growth sharply declined in the second quarter of 2025, as geopolitical tensions disrupted the country's recovery from last year’s recession.

Mercer’s Investment Portfolio Manager, James Wilson and Investment Consulting Analyst, Dushka Crighton share insights from Mercer’s global network of Investment experts covering:

• Recent developments in New Zealand’s investment market.
• US tariff uncertainties and Middle East geopolitical tensions.
• The outlook for New Zealand’s economy and investment markets for the rest of 2025. 

Impact of US Federal Reserve policies, political pressure and global uncertainties on the NZAS Retirement Fund

In September, the US Federal Reserve (Fed) cut interest rates, signalling a possible positive shift in monetary policy. This is because rate cuts support risk appetite, benefiting equities and fixed interest assets globally.

Here’s how Fed actions typically affect markets:

When the Fed raises rates, it usually leads to a stronger US dollar, the value of bond investments tends to lower, and investments like property and infrastructure assets begin to look less attractive.

On the other hand, when the Fed eases rates or signals a pause, it often boosts confidence in riskier assets like shares and bonds globally, which can be positive for both New Zealand and international fixed interest fixed interest, listed real assets and international equities.

However, political pressure on the Fed, such as from figures like President Trump, can add a layer of uncertainty to the markets. The Fed’s independence is crucial because it ensures decisions are made based on economic data rather than political considerations. If that independence is compromised, markets could become more volatile, as investors worry about policy decisions being driven by short-term political goals rather than long-term economic stability. This could increase risks across asset classes and make it harder to predict market direction.

What this means for the NZAS Retirement Fund

The Fund is positioned to manage risk while aiming for steady returns. Within the NZASRF portfolio, there is a significant allocation to international equities, as well as investments in global listed infrastructure and property, New Zealand fixed interest, and cash. International equities are often influenced by global economic conditions, including the ongoing geopolitical  tensions and trade uncertainties. Lets face it, markets do not like uncertainty. While these factors have caused some volatility, and may continue to do so, they also offer opportunities for growth as economies adjust and recover. Our active management aims to navigate these ups and downs to help capture those opportunities.

Closer to home, the Reserve Bank of New Zealand recently cut interest rates to 2.5% to support economic recovery. Lower domestic rates generally make borrowing cheaper, encouraging businesses to invest and consumers to spend.

Overall, while the global and local economic outlook has its challenges , the Fund’s diversified approach and active management are designed to navigate these uncertainties and support your retirement goals over time.

The investment returns for the period ended 30 September 2025 are listed in the video and can be found here.