Global markets ended June roughly 1% lower, though that headline number hides a lot of movement underneath it — a falling US market was offset by strong gains out of Japan and Europe. Sentiment swung between relief that the Iran conflict was de-escalating, and nervousness over the AI buildout and rising interest rates. In the end, positivity won out. 

For KiwiSaver investors, a sharp fall in the New Zealand dollar — driven by falling local interest rate expectations — gave offshore holdings an extra lift once translated back into NZD. 

*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.

Despite Nvidia announcing blockbuster earnings, nervousness around the AI trade pushed the tech-heavy Nasdaq index down 1.8% for the month. This was offset by the Russell 2000 delivering a stellar 3.6% return. The Russell 2000 represents the smaller (and largely non-tech) companies in the US — a sign that investors remain confident in the broader economy even as they get more cautious on AI-linked mega caps. 

Europe had a standout month, with the EuroStoxx jumping almost 5% as investors were relieved at signs of de-escalation in the Middle East and the prospect of the Strait of Hormuz reopening. The European economy is heavily reliant on energy imports from the Middle East, so an extended closure of the Strait had the potential to severely impact European economies. 

America is building the LLMs and data centres. Europe isn't really participating in the AI trade at all. The real power currently sits in Japan, Korea and Taiwan, where the memory chips, silicon and other processing components that power AI data centres are actually made. 

The Korean stock market has racked up an impressive 176% return over the past 12 months, with Taiwan and Japan following with 107% and 73% returns respectively. 

To be fair, Japan's story is about more than just AI — the Japanese economy is finally exiting its "lost decades" of deflation. Inflation is picking up, interest rates are rising, and the yen remains low (critical for the export-led economy), which has investors excited about the prospect of a resurgent Japan. 

The New Zealand stock market delivered a strong return of 2.9% — its best month in years — largely driven by falling interest rate expectations (see below) and improved domestic economic confidence. Maybe the economy isn't quite as sick as many of us had previously thought. 

In the US, interest rates are heading higher: stronger-than-expected growth and higher inflation expectations pushed the Fed into a hawkish stance. They no longer expect rates to fall this year — a stark change from the previous meeting. 

Here in New Zealand, the story is the opposite, with interest rate expectations falling as resolution of the situation in Iran has seen fuel and oil prices fall faster than anticipated. Economists are now split on whether the bigger problem is inflation or economic growth. All will be revealed in the next few days, with an OCR announcement on 8 July. My guess is that they hold. 

The price of Bitcoin continued to fall, ending the month down at $58k. It's hard to understand exactly why, given we're in a risk-on, higher-inflation environment — exactly the conditions Bitcoin is meant to shine in. 

Bitcoin is now down 55% from its peak, around the average drawdown for this cycle. It's hard to see what gives it a kickstart from here, or where growth comes from next.