The trend of the past few months continues with August delivering another set of records. The only major global markets that did not touch records in August were China, and little old New Zealand.

Markets are impressed by the ability for corporates to make more money than expected, and the prospect of even better earnings in the future driven by lower interest rates and a bit of stimulus out of Washington, D.C.

Things are universally positive at the moment, though it was August - which is usually a slow month, given any wealthy person living in the Northern Hemisphere has taken the month off!

*Source: Factset: Kōura returns are pre-tax and post-fees. Returns over 12 months are annualised. Local market returns use the relevant markets indices; NZ Equities uses NZX50 index; US Equities uses S&P500 index; Rest of World uses MSCI EAFE Index; Emerging Markets uses MSCI Emerging Markets Index, Fixed Interest uses Bloomberg Aggregate NZ Composite Bond Index. Bitcoin return is the USD change in price of Bitcoin. The return for an Aggressive Portfolio represents the equivalent of 95% growth and 5% income assets investing in core Kōura Funds. The return for a Growth Portfolio represents the equivalent of 80% growth and 20% income assets by investing in core Kōura Funds. Returns are calculated by Kōura. Past performance is not a reliable indicator of future performance. Returns are not guaranteed, and investment values may fluctuate over time.

US Earnings just keep getting bigger and bigger

The US earnings season has wrapped up with over 90% of companies reporting second15% quarter earnings in the month of August. Overall, the results were extremely positive with most companies beating earnings forecasts , full year earnings growth is now expected to be 15%The large technology companies were at the front of the pack delivering strong earnings powered by demand for their AI services; Nvidia reported 51% revenue growth, Microsoft reported 19% revenue growth, and even Meta was in on the party delivering 25% revenue growth. It is extremely rare for such large companies (Microsoft revenue is 1.5x the size of the entire NZ economy) to grow at such a massive rate.

When we see earnings results like this, it is easy to see the outlandish valuations companies currently trade at. In my mind, these companies fully justify their lofty valuations.

Optimism continues for the US economy

The US economy is walking a tight rope. Solid growth to keep powering the stock market higher, though not too high that it might stop interest rates coming down in September.

Inflation expectations are currently sitting at 3.0% (up from 2.6% in the prior month) - at the higher end of the band, though weakness in the labour market and bullying from the White House has led the market to expect the US Fed to start cutting interest rates in September (they announce their decision on 16 September 2025).

Jerome Powell seems to be on board with the idea of interest rates falling, with his Jackson Hole speech highlighting risks to the economy and specifically focused on the weaker job market.

The US Fed has a dual mandate; it is required to balance inflation and promote maximum employment. I bet Chris Luxon wished the RBNZ had the dual mandate right now rather than focusing solely on inflation!

The New Zealand RBNZ finally took notice of the “Help needed” sign

The RBNZ finally acknowledged what everyone else in New Zealand is feeling right now. The New Zealand economy is in trouble and needs a bit more help. The RBNZ Monetary Policy Committee agreed to lower interest rates by 0.25%, though interestingly 2 members of the Committee voted to reduce the official cash rate (OCR) by 0.5%.

Revised RBNZ forecasts show gross domestic product (GDP) contracting in the second quarter and weakness in employment data with less hours worked, and wage growth having stopped. Like previous forecasts though, recovery is just around the corner, and the RBNZ is hopeful that we have returned to growth in this current quarter.

The positive is that higher unemployment and lower wages mean there is significant “spare capacity” in the domestic economy. This will give the RBNZ room to cut interest rates. Current forecasts are for the OCR to fall to 2.5% by March 2026 (that should mean a 4.5% mortgage rate), though unless things change quickly, I suspect that will fall further.

China might be turning a corner

Recent economic data out of China continues to surprise on the upside. The trade war with the US seems to have stabilised in a better place than many had expected, and policy support is likely to support the ailing property sector.

Interestingly, Xi Jin Ping’s 10-year crusade to turn China into a high value tech economy might be starting to work with continued advances in AI, chip making, and of course electric vehicles. Even Elon Musk has asked for Tariffs: stating that he cannot produce cars at the cost or quality that the Chinese can.

The Chinese market has been the top global performer this year, though that is off a very low base after an atrocious 2024. Despite a 26% return this year, its 3-year return is down at 2.94%.

Trump is encouraging retirement accounts to buy Bitcoin

And finally, Trump’s support for Bitcoin continues. He issued an executive order during the month encouraging Employer Sponsored Plans to include Bitcoin as an investment option. It hit a peak of USD$123k during the month on the news, though has subsequently fallen back down to USD$107k as of 1st September 2025.

No doubt Donald Trump will come back with some revised news flow shortly to pump the price higher again.

What next?

We remain positive on the market. Companies remain highly profitable, the global economy remains strong, and the White House will do everything in its power to push the market higher.

We live in volatile times - so don’t be surprised if we get a pull back, but overall things are very positive at the moment and your KiwiSaver should be reflecting that!

Disclaimers:

*Bitcoin is highly volatile and not suitable for all investors. Before investing part of your KiwiSaver balance in the Bitcoin fund, ensure you fully understand the risks associated with cryptocurrencies: https://shorturl.at/U6Mkp, and/or consider seeking financial advice.

*The views and opinions expressed in this article are those of Rupert Carlyon. This content is for informational purposes and should not be considered financial advice. Before making any financial decisions, consider consulting a financial adviser.

*Kōura Wealth Limited is the issuer and manager of the Kōura KiwiSaver Scheme. A copy of the Product Disclosure Statement is available at kourawealth.co.nz/documents