Haves and Have Nots
In May we saw global share markets continue their strong recovery from the March lows. This pushed global shares to new highs and helped Milford funds deliver positive returns, especially our global and higher-growth funds. Bond markets were mixed, with New Zealand and Australian bonds outperforming US equivalents.
Share market returns were divided sharply into two camps – AI infrastructure winners and everyone else. AI adoption has surged over recent months, prompting investors to seek exposure across the full supply chain, from semiconductors to memory chips. This supported our major AI holdings such as Nvidia (+5.8%), Taiwan Semiconductor (+5.7%) and particularly Micron (+87.8%). It was also encouraging to see software stocks such as Microsoft (+10.7%) perform well, as investors became more confident about how AI could complement these companies’ products. Outside of technology, performance was more
subdued, with Australian and New Zealand shares
up just over 1%.
Bond markets were mixed, though New Zealand and Australian bonds outperformed their US equivalents as investors began repricing rate expectations in these markets – a tilt we have reflected in our positioning. The New Zealand dollar also staged a modest rally against most other currencies, recording its largest monthly gain against the Australian dollar in over a year.
Looking ahead, it is clear there are bubble-like elements to current share market dynamics. Such dynamics can persist longer than fundamentals would suggest, but it would be prudent to expect elevated volatility from here. We continue to find reasonable value in parts of the market that are currently being overlooked – and this conviction is keeping us invested. Current market dynamics require a more responsive approach. Positioning in our diversified funds is actively managed and responsive to market conditions, balancing the potential for further gains against the need to cushion against share market falls. Reasonable New Zealand bond yields continue to provide a solid anchor, and we remain positive on the medium-term outlook for returns.
