A purple patch
Milford’s Funds continue to deliver positive returns, supported by performance of share and bond markets. Through all the noise, global share markets continue to march higher. Global bond markets are also delivering positive performance as central banks continue on their interest rate cutting cycles.
Global share market performance was boosted last month by renewed optimism around the outlook for AI and technology companies. Increased expectations of demand for data centres were fuelled by software company Oracle (which we own) who announced a large pipeline of deals, sending the stock up 24.4% in the month. In turn, this supported share prices of other technology companies including our picks Nvidia (+7.1%), TSMC (+21.3%) and Google (+14.2%). Non technology stocks were more mixed last month. Bank stocks took a breather after a strong run, but Bank of Ireland (+10.9%) bucked the trend.
NZ assets did well last month, with NZ bonds a notable outperformer on the back of weaker second quarter GDP data. We have had heavier exposure to NZ bonds (vs global bonds) and this position has paid off over recent months. NZ shares rallied, albeit less than global shares. Real estate developer Precinct Properties (+6.6%), infrastructure investment company Infratil (+8.7%) and fuel import terminal Channel Infrastructure (+12.7%) were notable performers for us. Australian shares underperformed, finishing down on the month as bank stocks weighed. Gold miners such as Newmont (+15.9%) performed well on the back of a breakout in the gold price. Bond markets saw broad rallies last month as the US Federal Reserve cut interest rates. Expectations of lower interest rates in the US also appears to be fuelling stock market gains. The US economy is bifurcated, with weak employment market contrasting a booming AI technology sector. Meanwhile, the rest of the world is growing steadily, supported by falling inflation and interest rates.
Performance of asset markets and valuations already reflect a large degree of optimism from investors. Economic fundamentals remain supportive into next year in most regions that we invest in. The key risk is that valuations have run somewhat ahead of the fundamentals. That said, we continue to find reasonably valued investment opportunities, supporting the outlook for returns.
