Welcome to your February update

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

Performance data  

Performance as at 31 January 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

2025 has kicked off with good returns across key global equity markets in January, despite some turbulence from new tariff announcements, interest rate uncertainties, and developments in the artificial intelligence space. The emergence of a Chinese AI startup (DeepSeek) and its low-cost AI reasoning model also had ripple effects through the technology sector. However, broad optimism remains the case due to continued strength in the US economy and heightened business and consumer confidence following the US elections in November. Strong US economic data showing a resilient labour market and robust service sector activity led to rise in bond yields and tempered expectations of further Federal Reserve rate cuts. Yet the S&P 500 managed to produce 1.9% during January on a total return basis.  

At home in NZ the economic outlook is slightly more optimistic following the release of the inflation number for the fourth quarter, stabilising at 2.2% year-on-year. Yet performance in the sharemarket is still muted, with the NZX 50 down –0.9% for the month. Our preference to hold a higher weighting to Australian shares helped to mitigate this impact however, as the ASX 200 roared back into life returning 4.3% for the month, the best month for the index since January of 2023. The performance of the Australian market was largely driven by increasing anticipation of RBA rate cuts amidst cooling inflation and outperformance in the financial and consumer discretionary sectors.  

The High Growth Fund had a strong return of 2.46% for the month despite the continued strength of the US dollar versus the Kiwi, although there was no major change in the FX rate for the month. The standout performers for individual international stocks were Meta (+16.6%), Thermo Fisher Scientific (+13.9%), and JPMorgan Chase (+11.0%). Stocks linked to AI lost some value in January as market participants reconsider key buildout costs – Nvidia (-11.4%), and Apple (-6.6%) in particular.  

We saw a divergence in sector performance in the US with information technology beaten down (-3.8%), while communication services continued to run (+8.1%). Despite the drawdown in IT stocks, there was broad participation across all other sectors with the top performers following comms as follows: healthcare (+5.8%), financials (+5.6%), and materials (+4.1%).  

Sector performance in Australia was a mixed bag with gains largely coming from consumer discretionary (+7.0%) and financials (+5.9%). REITs did well amidst the changing interest rate narrative (+4.5%) while utilities (-2.6%) and comms (-1.7%) lagged. Top performers out of the direct holdings were QBE Insurance (+8.9%), Xero (+8.6%), and Macquarie (+8.5%). Domestically, Ebos Group stood out (+8%), followed by Precinct Properties (+4.2%).  

US Treasury yields fluctuated throughout the month, rising around 20 basis points in the first half of the month, driven by expectations of fiscal expansion under the new administration. However, yields fell later in the month as much weaker than expected inflation data shone through. Global investment grade corporate bonds returned around 0.6% in January, while US high yield gained 1.4%. This performance was supported by tightening credit spreads and robust investor demand.  

NZ government bonds faced a downturn in January as yields on short term notes and longer-term bonds rose. The corporate bond market saw limited issuance in January and spreads between corporate and government bonds remain tight. 

Lifestages Age Auto options with higher weightings to the High Growth Fund continue to perform better than those with a higher weight to the Income Fund.