In this episode of Bridge talks Business, Wealth Management Adviser Bruce O’Leary talks with Ryan Bridge about some of the biggest questions facing investors right now. From why parts of the US market are still performing strongly despite global conflict and inflation pressures, to what New Zealand’s economic outlook could mean for local portfolios, Bruce offers practical perspective on keeping a long-term view. He also explores whether political change should really influence investment decisions, and why many New Zealanders may need to rethink their traditional reliance on property and term deposits.

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Bridge talks Business: 19 May 2026

Episode Transcript

Ryan Bridge
Kia ora and welcome to episode 76 of Bridge talks Business with Milford. This week, we ask whether the record highs we’re seeing in US stock markets are justified. They appear to be predicated on tech stocks, AI investment, and an assumption that the war in Iran will soon be over and the oil will be free flowing. Bruce O’Leary from Milford is in the hot seat this week. We ask the question. First, here’s your top five business bits.

  1. US inflation accelerated to 3.8% last week. Energy pressures continued to mount. More importantly though, core inflation strips out the volatile bits, like food and energy, also up faster than expected by the markets. This bucks the trend that we’ve seen from other developed economies where core inflation pressures are actually falling.
  2. UK political noise continues. Keir Starmer’s role as PM looks increasingly challenged. UK assets traded poorly as it emerged that a more left-leaning Labour Party member may attempt a challenge. This is a tricky task, lots of complexity here but the uncertainty is likely to linger.
  3. We received some inflation data here in New Zealand and in general, it was good news. Inflation expectations data showed a smaller rise in short term numbers than expected and a surprising drop in medium-term expectations. We also had a softer selected price index release which led to local economists revising down forecasts for quarter two inflation.
  4. The Australian budget was released last week which featured some very interesting changes around negative gearing and capital gains. Both of these measures likely to weigh on investor confidence, and this comes at a time where housing data is already showing signs of rolling over.
  5. This week the market is looking ahead to a busy week of data releases in the UK which includes CPI, jobs and retail sales. Domestically, we’re watching Australian jobs data and consumer inflation expectations here in New Zealand.

This week on the podcast, we’re asking the question that you want answered. How does all of this make sense? How do we have a war on, oil up above $100 a barrel, and at the same time have record highs on Wall Street? Well, we’re gonna ask Bruce O’Leary, Wealth Management Adviser at Milford, that very question on the podcast today. Just a reminder, this segment is informational only and should not be considered financial advice. Bruce, welcome back.

Bruce O’Leary
Thanks Ryan, good to be here.

Ryan Bridge
Good to see you. I need you to make this make sense for me. So we’ve got oil back up above $100 a barrel. We’ve got the world in turmoil, but we’ve got record highs on Wall Street. What’s happening?

Bruce O’Leary
And I think you’re right to say there’s record highs on Wall Street. I think it is pretty key to differentiate between the US share market and other share markets out there. So if you look at Australia, New Zealand, UK, Europe, those markets are not at highs. In fact, you know, they’re sort of five, six, seven percent below where they were. So far this war has been what we’d call an inflation scare. So, a lot of the reaction has come via the bond markets and fixed income markets rather than share markets.

If you look at interest rate expectations around the world, they’re probably in the order of about half a percent higher than what they were pre the initiation of the war at the end of February. And so that flows through to expectations for growth in places like New Zealand. But in the US, you’ve still had very, very strong growth and earnings growth. So, that share market and economy has been pretty resilient so far. But I would say that some of that growth is in the AI sector – or the majority of it. And those companies are massive companies. That’s a key differentiator between the US market and some of these other countries’ markets. So earnings growth has been 30 percent in a lot of these cases. And if you look at the forward forecast from analysts in the market, they are forecasting earnings growth in the high teens – somewhere around 18 percent the next 12 months in the US market. And that’s much higher than these other markets.

Ryan Bridge
What does that tell us about the expectations? Is this a story about, oh, well, there was a Strait of Hormuz issue, but we think that oil will flow around it. And that sort of solves the problem. Or we don’t really think Trump is that keen on this war. And so we’re kind of pricing that in?

Bruce O’Leary
I think there’s definitely an element of that being priced in. It’s pretty clear Trump does want an off ramp, but it’s not clear that he can guarantee to get one. So you have seen the oil futures curve start to move a little bit higher of late. But the market is really pricing in an end to this war at some point, which is probably a realistic scenario. But it means it’s not pricing in a $110 oil into perpetuity. It is pricing it in to come back down at some point. And that’s why share markets are looking through it and they’re treating it as an inflation scare rather than an economic growth scare yet.

Ryan Bridge
If I’m worried about New Zealand, my investments, how worried should I be about this?

Bruce O’Leary
Well, it’s easier to get a little bit over focused on New Zealand because we live here, we watch it in the news every day. But to our diversified investors, you know, we only have a portion of their money invested in New Zealand. I think that makes sense. A lot of people have their own property here, they’ve got assets here. It makes sense to have diversification offshore. I think you do have to recognise that New Zealand is an interest rate-sensitive economy, because Kiwis have large household debt, i.e. mortgages, compared to somewhere like the US. So when you have this increase in interest rate expectations like we just had over the last two months, that does hurt New Zealand’s economic outlook more than it hurts some countries where there’s lower household debt.

In New Zealand, for example, before this war, fixed income markets were pricing in three rate hikes over the next 12 months. Now its pricing in five rate hikes over the next six months, the next 12 months, I should say. We’re not convinced I’ll go through with those rate hikes, but the fact is the market’s pricing them in, that’s causing higher mortgage prices and things like that. And so you have seen a bit of a downturn in some of the confidence statistics here, some of the confidence surveys, your business confidence, consumer confidence. And they’re what we call forward indicators. So that implies we could have a slowdown in economic growth here in New Zealand.

Ryan Bridge
Although we did have the exact same sentiment issues last year with the tariffs, right? And then things turned out to be maybe not as bad as what we thought they were going to be at the time we were asked.

Bruce O’Leary
Correct. And sentiment indicators can move very quickly. So if we are to wake up next week and you see an end to this war, those sentiment indicators could turn around very quickly. And that’s kind of what happened with the tariff stuff last year. They got reversed pretty quickly by Donald Trump. So you actually saw sentiment turn around quite quickly.

Ryan Bridge
Bruce, what about a lot of people ask me about the change of government? How much does a change of government actually affect a portfolio, an investment portfolio? Is the answer really not that much?

Bruce O’Leary
I think in the long term, the answer is not much. In the short term, it can if you have a change in policy. It’s not about politics. It’s about policy. So if you were to see a big change in policy towards a certain sector, then absolutely that sector is going to get faced with some issues potentially. You know, in Australia, you’ve seen a change in interest rate deductibility and those sort of things. So when you get those kind of moves, it can cause a short-term issue for some sectors and for some companies. But longer term, actually, it doesn’t matter so much. Markets have gone up under Labour. Markets have gone up under National because economies grow over time. I remember Warren Buffett saying, since he first bought his first stock many, many years ago, there had been 14 US presidents, seven were Republicans and seven were Democrats. And in the long term, it just didn’t matter because economies grow.

Ryan Bridge
What about people with a rental property? Because this is one of the potential areas. You talk about policy areas of differentiation between Labour and National – the interest deductibility, that kind of stuff. What do you do with your rental property at a time like this?

Bruce O’Leary
We get asked this a lot because a lot of that generation of Kiwis have owned rental property for quite a long time. Since 1987, Kiwis got burned during the crash. So bricks and mortar were the safe haven investment. And look, don’t get me wrong, that turned out to be a fantastic investment over those number of decades, and created a lot of wealth for Kiwis. But as we sort of sit here and look forward, you get your return from an investment property by your rental yield and via capital growth. And for the last little while, the last few years in fact, you haven’t received that capital growth. So if you remove that from the equation and say, actually, my capital growth going forward, maybe it’s going to be aligned to affordability. And if you look at affordability around the world, a lot of times property prices tend to track wage inflation because that’s what the affordability issue is. So if we were to apply that, maybe the forward outlook for property is more in line with the CPI-type kind of growth in terms of your capital growth plus your rental yield.

I think you have to look at it versus the opportunity cost of a diversified portfolio, which might be investing in shares. And shares are investing in what we call productive assets. So they’re producing cash flows. They’re producing growth in the units that they produce. They get pricing increases in line with inflation. So that’s what enables economies to grow. That’s what enables companies’ revenues to grow and earnings to grow. And essentially that underpins the growth in share markets from year to year, as opposed to just owning what is the nonproductive asset in property.

Ryan Bridge
I am interested to know what is going to happen in Australia with the negative gearing changes, gearing changes that they’ve made and also the capital gains tax changes that they’ve made, because that could actually have quite a serious impact there, right?

Bruce O’Leary
Certainly there’s been an initial reaction from markets towards the banks and sectors that are exposed to that. I think we’ve been through the interest rate deductibility changes in New Zealand before. And I wouldn’t say it really drove demand for properties, but it certainly would have impacted it. So there’s no doubt about it when you increase capital gains tax and people will start to look at it and they might look at alternative investments instead of property. So I think, yeah, we can we can look at what’s happening in Australia. But for Kiwis, we’re going to be subject to our own policy here. And it might depend on who’s in government. We have already had some discussion around capital gains tax if Labour were to get in. I think that becomes part of your investment decision as you look at these assets.

Ryan Bridge
Bruce, when do you think we’re going to be through this? This is like crystal ball stuff. But when you reckon we’re going to be through this period, this sort of rough patch, or do we just need to accept and kind of prepare ourselves for an annual rough patch? Because it seems like we’re having one most years, at least with Trump in the White House.

Bruce O’Leary
Well, with Trump there, he does bring an element of uncertainty and markets react to uncertainty. But underlying economies have still been growing. And that’s what markets do revert to, albeit with short-term jitters around uncertainty. Our view is that the outlook is one where economic growth was on the right track to be recovering in some of these economies. And it was always strong in the US. So if we are to get an end to the war, I think sentiment could be reasonably good towards markets, because some of these higher interest rate expectations – you may see central banks actually look through that a little bit and not hike them as much as what the market’s expecting.

Ryan Bridge
Bruce, great to have your advice on the podcast this morning.

Bruce O’Leary
Great. Thanks for having me.

Ryan Bridge
And that was Bruce O’Leary, Wealth Management Adviser at Milford, talking to us about the war, the price of oil, and the stock market. As he explained, markets are relatively robust in the face of these headwinds. Just a reminder, you can like, follow, and subscribe this podcast wherever you like to listen. We love you doing so. Until next week, don’t forget to invest in yourselves.