A busy summer
2026 has started with a bang, with plenty of news flow and market moves to keep investors on their toes. Amongst all of this, Milford’s diversified funds delivered largely flat returns with lower risk funds outperforming and Australian Funds outperforming Global Funds.
January was notable for increased geopolitical headlines, from Venezuela to Greenland and Iran all implicated in US led action or potential action. Markets largely shrugged off these headlines, reflecting an ongoing economic reacceleration that is ensuring company earnings growth remains strong. Much like last year, performance at the start of the year was notable in global regions outside of the US, including the UK and Europe. For us, this benefited our holdings in UK utility SSE (+11.2%) and Spanish airport operator Aena (+10.1%). Some US stocks also outperformed, such as ongoing strength in Google (+7.9%) as well as the AI infrastructure stocks like Micron (+45.4%) and TSMC (+8.8%). These helped offset losses from key pick Microsoft (-11.0%) – we continue to think there is good medium-term value in the shares.
Closer to home, Australian small caps outperformed owing to strong commodity price gains. Strength in the gold price helped Newmont (+12.5%), a position we trimmed towards the end of the month. NZ shares continue to underperform, weighed down by rising market interest rates. This also boosted the Kiwi dollar last month (up 4.6% vs the US dollar), vindicating our decision to go overweight at the end of last year.
Bond performance was more muted last month although Australian and NZ bonds continue to underperform global peers. We think this represents an opportunity to add to local (Australia and NZ) fixed income positions and have been reallocating accordingly. We remain averse to US dollar bonds owing to poor value and the risk of higher inflation.
Looking ahead, the investment backdrop remains fundamentally sound, but that is a view shared by most investors. We also acknowledge that the landscape is shifting rapidly and this could lead to greater volatility. With that in mind, we remain nimble and continue to look for pockets of value in markets.
