November saw volatility across global markets and shifting expectations for central bank policies. Being diversified was the best strategy to follow.

Healthcare was the standout sector for global equities during November, up 9% in the US. Several larger companies posted positive trial findings and better third-quarter results than expected. This was backed up by Communication Services up 6%. This was helped by a good return from mega weight Alphabet, which is now the world’s 3^rd most valuable company, and proving a winner in the AI space. The defensive sector Consumer Staples was also up 4%. This offset a pause in the IT sector, which after six months of charging along fell around 4% during November. There were concerns about AI-linked valuations and the levels of economic growth in Europe and Asia.

Global bond markets were mixed in November. US corporate credit performed well, but spreads widened versus Treasuries. The Treasury yield curve steepened as yields in shorter maturities fell while the long-end remained stable upon consensus the central banks are nearing the end of the rate reductions.

Domestically the Reserve Bank continued cutting the OCR, down another 0.25% to 2.25%. Indications were signalled that we could be now closer to the bottom and the next cut may not be until early 2026. These indications were not taken too positively by the share market, which fell 0.4% during the month. Across the ditch the Australian share market was even worse, down almost 3%.

The standout for the Scheme was the performance of the Focused Growth Fund. The Fund returned 1.02% for November. The main drivers of this were Eli Lilly +24.5% with strong third-quarter results and who struck a deal with the US government for coverage under Medicare and Medicaid. Also, the ‘Zepbound’ and ‘Mounjaro’ pharmaceuticals are fast becoming the best-selling weight-loss drugs around the world.

The other performers included Alphabet +13.6%, AstraZeneca +12.3% (on announcement of a major $2 billion commitment to expand its manufacturing facilities in Maryland), and Walmart +9%.

The High Growth Fund returned 0.12% for November with gains from global equities offsetting losses from domestic equities, particularly Australian financials and IT. The leading stocks for November were Eli Lilly +26.1%, Roche +18.4%, Alphabet +13.5%, AstraZeneca +12.2%, Mainfreight +11.5%, Walmart +9% and Summerset +8.2%.

Two new underlying investments were added to the Fund last month. We added Schroders Sustainable Global Core Fund, which targets higher quality stocks as well as fundamentally cheaper stocks. This fund also provides the High Growth Fund with additional currency hedging, to help protect against a rising NZ dollar versus the US dollar. The second investment is the Munro Global Climate Leaders Fund which is a concentrated portfolio of stocks looking to benefit from decarbonisation globally.

The Income Fund returned –0.26% for November. A hawkish RBNZ rate cut signalled the easing cycle may have ended. This led to rising longer term interest rates in New Zealand, thus detracting value for the Fund. This was somewhat offset by a flat global bond market, and shorter duration assets held by the Income Fund, both domestically and globally. A lower OCR (down 0.25% at the end of the month) with slightly reduce the yield going forward on this fund.

The Cash Fund returned +0.20% for the month. The announcement by the Reserve Bank of New Zealand to reduce the OCR from 2.50% to 2.25% has reduced the running yield on this fund and the likely shorter term monthly performance going forward. The fund does remain a solid option to preserve your capital before retirement.