Nothing stops this train
Milford funds continue to deliver solid returns with gains across funds of all types last month. This was supported by an ongoing grind higher in global share markets, coming alongside broadly positive gains from bonds. Investors are increasingly sanguine about policy risks, whilst looking forward to an expected uptick in economic growth in 2026.
Share markets continue to build on their gains post the March/April wobble. Stock leadership changes month to month, but banks remain consistent performers, benefiting from resilient economic growth and lower interest rates from central banks around the world. We remain heavily invested in banks and notable performers last month were Bank of Ireland (+7.1%) and Bank of America (+7.3%). Other highlights in our global portfolios were building materials company CRH (+18.7%), hospital operator HCA Healthcare (+14.1%) and US homebuilder Pulte (+16.9%).
Closer to home, company reporting season did see some disappointments, such as healthcare products distributor EBOS Group (-20.3%) and Australian biotechnology company CSL (-21.4%). However, our Australian small caps performed very well. In contrast, the NZ market continues to lag with the NZX 50 underperforming global peers despite the Reserve Bank of New Zealand signalling the likelihood of further interest rate cuts in addition to the ¼ point reduction last month.
Bond markets rallied last month, with outperformance from shorter-dated bonds and NZ bonds (where we are more heavily invested). Central banks continue to cut interest rates, and the US Federal Reserve is likely to join the trend next month even with US inflation moving higher as tariffs take effect.
As we look ahead, the risks of weaker economic growth are waning as policy supports in the form of lower global interest rates and increased government spending are improving the outlook. US tariff policy continues to be a risk for growth and inflation, but one that is increasingly discounted by investors. Whilst we continue to find companies at reasonable valuations for the outlook, broad investor optimism and expensive valuations do temper our enthusiasm somewhat. The last few months have seen reduced volatility. We are alert that September tends to herald some surprises for investors to deal with.
