Crosswinds
January saw its fair share of ups and downs across markets as investors were buffeted by policy uncertainties emanating from the new US administration. Ultimately though, Milford funds came through the month unscathed with positive returns – higher risk funds in particular had strong performance.
Global shares were broadly higher last month, with stock prices being partly driven by earnings results. Technology stocks were also buffeted by news of increased competition in AI from China in the form of DeepSeek. Despite the volatility, some of our key holdings had strong returns last month, including large technology companies Meta (+17.7%) and Amazon (+8.3%), as well as others such as Interactive Brokers (+23.1%) and JP Morgan (+12.1%). Some of the strongest returns in share markets were found outside of the US last month. UK shares in particular had a strong month as expectations grow around deeper rate cuts by the Bank of England. Stocks such as NatWest Group (+7.7%) and Bank of Ireland (+9.3%) are benefitting from this improving view of the outlook. NZ shares were a laggard after a strong performance in December.
Bond markets delivered modest returns for our funds in January, largely due to the reasonable yields that we can continue to earn on our fixed income investments. Currency markets continue to react nervously under the influence of tariff statements from President Trump.
Looking ahead, the US economy is on solid ground whilst the rest of the world remains soft. Falling interest rates should start to boost global economies, but central banks remain wary that inflation remains stubbornly just above targets. Policy uncertainty is high, and this has the potential to cause volatility in markets. Share market valuations and sentiment is high in the US. This is a concern, especially if tariff threats from the Trump administration become a reality. We will look to try and manage any volatility, and we are still able to find good value investments, particularly outside the US, for example in the UK as highlighted above.
