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June Market Update: AI mania and a Middle Eastern peace dividend

10 Jul 2025

June delivered everything markets love — great economic data, a few rate cuts, another dose of AI euphoria, peace in the Middle East and of course a few more Trump theatrics.  It's no wonder that global stock markets continue to push into record territory. The US S&P500 rose 5% to join its European and Japanese peers in record territory. Global markets jumped almost 4% in the month. The major laggard continues to be New Zealand.   

KiwiSaver balances continue to rise, though are paying the price for a very weak US dollar which is pushing the value of those US shares down when shown in your KiwiSaver app. 

 

 

*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. 

War and then peace in the Middle East 

Israel's bombing of Iran sparked fears of an all-out Middle Eastern conflict and saw oil prices spike as rumours spread that Iran would close the Strait of Hormuz (20% of the world's oil passes through this narrow body of sea). A few bunker busters from the US and the crisis appears to have been averted. Unfortunately, Iran's network of allies through the Middle East has been absolutely decimated over the past 18 months, leaving them with very few friends and options. Oil ended the month lower than where it started which will be an important driver of disinflation.  Let's hope that peace holds. 

US interest rates don't appear to be going anywhere  

The US Fed kept interest rates steady at 4.25 – 4.50 percent on 18 June, marking four straight “wait-and-see” meetings. Chair Powell repeated that cooler data are still needed before cuts begin. Less than two weeks later President Trump blasted Powell as “stupid” and said he’d “love” rates at 1 percent — stoking fears about Fed independence and nudging treasury yields higher.  

Subsequent strong jobs numbers make it seem less and less likely that we will see rate cuts this year. The US economy continues to go from strength to strength and Trump's Big Beautiful Bill is likely to fuel further growth given the massive deficits that it will lock in.  

AI mania Keeps US tech flying high 

Tech earnings momentum accelerated: the Nasdaq gained 6 percent in June. Nvidia announced its results at the very end of May showing continued demand. Off the back of the results, Nvidia returned to its all-time highs, beating its previous November highs. Strong results from Broadcom, Oracle and a myriad of others showed that AI demand continues to accelerate. 

Investors remain nervous about the USD 

The RBNZ’s late-May OCR cut to 3.25 percent has yet to reignite domestic demand. Rural commodity prices are at all-time highs, though farmers are prioritising paying down debt rather than spending — unusually, tractor sales are at recent lows despite high commodity prices. 

Politicians celebrated a very strong Q1 GDP (0.8% growth vs a 0.4% expectation), but subsequent jobs and confidence data showed any celebrations may be premature.  

The NZX continues to tread water as investors try to gain clarity on whether New Zealand will get back to growth and what happens with interest rates. The RBNZ will be carefully weighing the risks of higher inflation (a weaker USD and tariffs will push inflation higher) versus using lower interest rates to stimulate the economy.  

What's coming in July 

In July, we’ll be watching for the US Fed Funds announcement, resolution on tariffs with the 45-day reprieve expiring on 9 July, and another OCR announcement here in New Zealand on the same day. It’s going to be another busy month! 

 

Disclaimers:  The views expressed are those of Rupert Carlyon and are provided for information only. They do not constitute personalised financial advice. Past performance is not a reliable indicator of future returns. Investments, especially Bitcoin, can go down as well as up. Consult a licensed financial adviser before making investment decisions. Kōura Wealth Ltd is the issuer and manager of the Kōura KiwiSaver Scheme; a copy of the Product Disclosure Statement is available at kourawealth.co.nz/documents.