Please disperse, nothing to see here
Investors continue to be confronted by unanticipated risks, with the geopolitical situation in the Middle East the latest event to grab investor attention. And yet, financial markets have exhibited a remarkable degree of resilience to these shocks. Consequently, Milford’s funds continue to deliver solid performance with positive returns across all funds last month.
US share markets led the charge after six months of underperformance, and largely shrugged off the highly volatile oil prices. Much of the performance was driven by technology companies which are less economically sensitive, such as Oracle (+32.1%), Micron (+30.5%), Nvidia (+16.9%), and Microsoft (+8.0%). European shares broadly underperformed the stronger US market, but many of the stocks we are invested in continue to do well. These include beneficiaries of lower interest rates such as UK telecommunications provider British Telecom (+8.0%) and electricity utility provider SSE (+4.0%).
Australian and NZ shares delivered positive gains, although they lagged global benchmarks. Capital market activity is elevated in Australia, with our funds participating in deals including the listing of Virgin Australia, which finished the month 6.6% above its issue price. In NZ, real estate company Precinct Properties (+3.4%) continues to be a strong performer.
Weakening economic data, coupled with market hopes for further easing from central banks around the world, helped fuel a rally in bonds last month. This supported the performance of our lower-risk funds, which were further aided by the outperformance of corporate bonds.
Looking ahead, tariff implementation and policy uncertainty are likely to result in a weaker period of global economic growth. The good news is that this period may be short lived as fiscal spending from governments in the US and Europe picks up in 2026 to support a recovery in growth. Yet a year is a long time in financial markets, and this is an environment where diversification can help. Elevated valuations in shares can be mitigated by diversifying exposure to lower valued regions such as the UK, as well as a careful approach to stock selection. Concerns over softer economic growth means some exposure to shorter-dated bonds can also help cushion funds as interest rates remain elevated.
All up, whilst there remain downside risks, the backdrop for investment returns remains reasonable.
