Welcome to your May update

Dear member, welcome to the SBS Wealth KiwiSaver Scheme Investor Update for May 2025. Below you will find the latest performance data and market commentary from your SBS Wealth Investment Management Team. 

Performance data  

Performance as at 30 April 2025. 

The Lifestages Auto Options invest in combinations of the SBS Wealth High Growth Fund and the SBS Wealth Income Fund in proportions that vary in accordance with pre-selected age bands. These options automatically adjust the risk profile of your investment by altering the proportions invested in the funds based on your age. 

Performance is shown after fees and before tax. For more information about how performance is calculated and more performance periods, click here. 

Market Update

The month was dominated by US President Donald Trump’s unexpected ‘Liberation Day’ tariffs. This included 10% duties on New Zealand and Australia plus up to 145% on China. This immediately triggered volatility in equity markets across the globe, even though no data was made available as to what the real effect of these tariffs on individual companies was going to be. No market was left unscathed, though US equities suffered more than others, and in particular the technology and consumer discretionary large cap stocks. Small capitalisation stocks in the US also fell considerably, as these are less likely to absorb the extra costs.

Despite the volatility and gloom in the equity markets in April, the US Q1 earnings season showed a high proportion of companies beating consensus expectations and reversing downgrades from previous quarters. This was particularly notable in several of our large mega-cap technology companies that we own within the Scheme. For examples Microsoft’s Azure revenues were up 35% year-on-year. Meta, Apple and Amazon also all bet their first quarter revenue forecasts.

We saw a recovery in equity markets over the last ten days of the month, reversing the losses from the first three weeks, as investors started seeing stocks becoming more attractively priced and good buying opportunities.

Closer to home the Australian equity market performed well in April, up around 1.5%, avoiding most of the tariff speculation to date. Holding defensive sectors like banks, supermarkets and resources, and avoiding technology and consumer discretionary stocks benefited the Scheme.

The New Zealand central bank responded with a 25-basis point OCR cut to 3.50%, signalling scope to lower the OC further as appropriate. Inflation for the first quarter of 2025 was up slightly to 2.5%. This is still within the 1-3% target band. The OCR is forecast to continue to fall throughout 2025. While this should lead to lower term deposit rates, it will be a benefit to fixed interest investments and our conservative risk profiles.

The High Growth Fund fell 2.42% during April, on the back of the Liberation Day tariff announcements and a strengthening New Zealand dollar against the US dollar (a stronger NZ dollar reduces the valuation of offshore shares when reported back in the Fund). This was partly offset with a 50% currency hedging policy. Holding over 10% of the portfolio in Australian equities benefited members during April, with this collection of stocks adding 2.5% positive return in NZD.

Stocks that felt the most impact from the tariff news were United Heath Group –25%, Thermo Fisher –18%, Pepsico –14%, Disney –12%, and Mainfreight –10%. Bucking the trend were a number of our defensive stocks, which held up well throughout the month. L’Oreal was up 13%, CBA 8%, Wesfarmers 7%, Walmart, Telstra, and Woolworths all over 5%.

The Income Fund gained 0.71% over April, as fixed interest rates fell slightly during the month on central banks continuing to lower OCR and further forecasted cuts. New Zealand fixed interest gained more than its global counterparts, up 1% versus 0.6% globally.