July served up everything at once: central‑bank fireworks, tariff deals, blockbuster AI earnings, European resilience, and further normalization of cyrptocurrencies. Similar to previous months, despite plenty to worry about, global equities pushed higher into record territories. Global markets delivered a 2% return in the month.

*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.

NZ remains in the doldrums but the RBNZ hits pause

New Zealand’s Reserve Bank chose to hold interest rates flat in July. A much debated and talked about decision. Inflation has eased from last year’s peaks but is starting to push higher (driven largely by global factors), with GDP growth softening and the housing market only tentatively stabilising.

The big debate is whether the current interest rate settings are contractionary (slowing down growth) or neutral. Your answer will probably depend on how exposed to the housing market you are. It is a difficult spot with the RBNZ wrestling between stimulating a struggling economy (with lower interest rates) and crushing inflation (with higher to flat interest rates). We risk entering into a stagflationary environment which makes this an extremely difficult tradeoff.

Indicators of GDP growth are coming out very negative at the moment with a number of “flash indicators” indicating that we may be back into recession.

Unfortunately the lack of interest rate cuts and the slowing New Zealand economy means the NZ stock market continues to underperform. The NZX delivered a 1.7% return in the month taking its 1 year return to 3.4% compared to the world index of 15%.

Tarrifs are back!

Late July brought a flurry of agreements between the US and its different trading partners with the 1August deadline approaching.

Deals have been done, but tariffs are coming in pretty heavy.  On current settings, U.S. importers face an average tariff in the mid‑teens (circa 16–17%), a step‑change from ~2% that importers paid in January.  

Markets have not blinked at the new tariff policy.  A 10% tarrif has ben in place since April, during this time companies have managed to absorb the costs and s far we haven’t seen any material impact on the broader economy.  Markets continue to believe that the impact won’t be as severe as initially feared, and if growth starts to suffer because of the tariffs, then people expect Trump to reverse course. 

For New Zealand, a 15% rate is unlikely to be material.  The US makes up only 12% of our exports so overall we are talking about a few percentage points on our GDP.  The main industries that will be impacted are wine (this could be an issue), beef (though other markets will take our product) and wood products.  Unfortunately Australia and Argentina both ended up with 10% tariffs and these are competitors with a similar export profile putting New Zealand at a disadvantage.

The Fed: steady hands in a noisy room

The U.S. Federal Reserve left rates unchanged much to President Trumps anger. For the first time in over 20 years, two Federal Reserve committee members dissented in favour of a rates cut, which keeps September squarely in focus for potential cuts. The massive spanner maybe the tarrif conversation with economists conflicting on whether the tariffs will be inflationary or not.

AI earnings keep doing the heavy lifting

The current AI boom is not going anywhere and if anything appears to be accelerating. Nvidia, Microsoft and Amazon all announced massive earnings numbers all driven by increased demand for chips and cloud services related to AI. Nvidia and Microsoft are the first companies in history to reach US$4 trillion market cap off the back of this AI boom.

Bitcoin edges further into the mainstream

Bitcoin set fresh records during the month, briefly touching around US$120,000 before easing to the low US$110,000s after month‑end.

The catalyst for growth was action from the US Goernment legitimizing stable coins through the passage of the GENIUS Act, a piece of legislation that moves digital money further and further into the mainstream.

Where to next?

If anything, July felt almost too good: returns keep grinding higher and volatility kept drifting lower despite well‑advertised risks.

The focus for markets is likely to be around whether the U.S. consumer keep spending, and can companies protect margins in a higher‑tariff world? Early August delivered a jolt with a weak job report and a quick equity wobble - a reminder that the newsflow won’t slow just because investors are on holiday.

Disclaimers:

*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.

*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.

*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