Commentary on the September 2025 quarter by Russell Investments, UniSaver’s investment manager and consultant

Global markets

The MSCI AC World Index returned 12.5% (NZD) in a positive quarter for global equities. Progress on trade talks with President Trump’s administration and solid corporate earnings results buoyed sentiment, helping to push major indices to new all-time highs.  Oil prices dropped back after peaking near $70 per barrel in July. Gold hit new records, breaking through the $3,500 barrier, and climbing to $3,800 at quarter-end, benefiting from its safe-haven status. 

US equities outperformed the global index and markets in Europe, the UK and Japan. The S&P 500 Index reached a record in early July and touched new all-time highs later in the period. Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium in which he alluded to an adjustment in monetary policy encouraged speculation over a September rate cut. This boosted investor sentiment propelling equities higher. 

European equities underperformed the global index and all other markets. Shares fell early in the quarter on a lack of progress on trade talks with the US. Although the US and European Union agreed a framework trade deal involving a 15% tariff on most EU goods, the boost to equities quickly faded. UK equities underperformed the global index and other markets except Europe. Markets were volatile early in the quarter, triggered by the government's reversal on planned welfare cuts – and subsequent pressure on its own fiscal rules. Prime Minister Keir Starmer's subsequent support for Chancellor Rachel Reeves helped calm market nerves. The FTSE 100 broke new record highs and symbolically passed 9,000 points in July, helped by strong earnings reports in banking and defence sectors.

Japan outperformed the global index. The TOPIX index broke through the 3,000-mark for the first time in August as investor sentiment was boosted by a trade deal with the US. Positive economic data also contributed including better-than-expected second quarter growth and the latest inflation figures, which showed annual inflation ease to 2.7% in August from 3.1%, the lowest since October 2024.  

Emerging markets (EM) outperformed the global index as measured by the MSCI Emerging Market Index, recording double-digit gains. China, South Africa and Egypt were among the best performers. South Africa’s equity market was boosted by a strong performance among gold miners.  Chinese equities strengthened on solid interest from domestic investors and improving sentiment as US-Sino trade tensions eased and trade data encouraged with exports beating forecasts in July. In contrast, India, the Philippines and Indonesia were at the bottom of the table recording losses over the period. India’s financial markets were hit by President Trump’s announcement of 50% tariffs on Indian goods as a penalty for buying Russian oil, which will impact Indian exports.

The Bloomberg Global Aggregate Bond Index (NZDH) rose by 0.9% over the quarter. Relatively resilient global growth and continuing market optimism pushed 10-year government bond yields higher in major developed markets during July. Later, weakness in the US labour market sent 10-year Treasury yields downward and prompted an apparent policy shift by the Federal Reserve (Fed), away from controlling inflation to growth and employment. Meanwhile, market nervousness at President Trump’s tariff policies eased as the Fed indicated the impact on inflation may be temporary. 

In credit markets, spreads narrowed, particularly in high yield. US dollar performance was mixed, strengthening against the Japanese yen and UK sterling but weakening slightly versus the euro. The Fed cut rates by 25 basis points (bps) to 4.25% in September. The Bank of Canada and the Bank of England (BoE) also cut rates by 25 bps in the quarter while the European Central Bank (ECB) left rates unchanged.

Domestic markets

New Zealand equities produced modest to mixed returns over the quarter, reflecting investor caution amid softening economic signals. While some sectors with exposure to infrastructure, energy transition, or export markets held up, the overall NZX benchmark languished under pressure from weak domestic demand and tight financial conditions. 

New Zealand’s fixed interest market also delivered positive returns for investors, driven largely by falling yields as the Reserve Bank signaled a shift toward monetary easing. Credit spreads remained stable to slightly tighter, supporting returns across both government and high-grade corporate debt. Shorter-duration instruments offered modest gains, reflecting more limited movement in front-end rates. 

How did markets affect UniSaver’s investment options?

Strong gains from global equity markets led once again to positive returns for all member options over the quarter. The Conservative option returned 2.5%, Balanced 4.7%, Growth 6.5% and Growth (Lower Carbon) 9.3% after the deduction of fees and tax. The Cash option delivered a 0.7% return over the same period.

Over the last year the Conservative, Balanced and Growth options have returned 4.6%, 8.7% and 12.0% per annum respectively, after the deduction of fees and tax. 

Looking ahead

We believe that US recession risk has faded but there are still areas to watch. Tariff impacts continue to ripple throughout the global economy, inflation remains stubbornly above central banks’ comfort levels, employment and consumer spending data show a slow deterioration and AI capital spending has raised dotcom bubble comparisons. Our base case has shifted from recession to a gradual slowdown in the global economy.

US equity markets, which are highly concentrated in mega-cap growth companies, remain expensive relative to other regions. We favour a slight overweight to Europe ex UK and emerging markets and underweight to the US.

US 10-year rates moved lower over the quarter and now sit close to our fair value estimates. UK rates look attractive from a valuation perspective as fiscal concerns brought a meaningful premium over U.S. treasuries. ​Credit continues to look expensive as spreads move to their tightest level since the GFC. Credit fundamentals are positive, and demand remains robust for the all-in yields these bonds provide.