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 effort 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 will 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.

On the back of this, all the models were negative during April, as negative global equity returns more than offset positive returns from fixed interest and Australian equities. Models with more growth assets (e.g. 98/2, 80/20) were more negatively affected from the performance of the global equity markets for the month.

The portfolios remain defensively positioned. However, global technology stocks still retain the highest allocation within the portfolios, and the outlook for them remains strong.