Equity markets continued their strong growth in May, up around 4.5% for the month in local currency and 2.8% in NZ dollars (as the NZ dollar appreciated versus the US dollar and the other major currencies). Bond markets also had a positive month in May, although they remain volatile. The New Zealand bond market was particularly strong, up around 1%, while global markets were up 0.5%. 

Japan was the strongest developed market globally, on the back of growing hopes for a resolution to the conflict in the Middle East, which underpinned investor sentiment. Earnings announcements began the fiscal year in earnest. This was led by AI and semiconductor-related names. The US market was also particularly strong, notably the technology stocks. Again, a reduction in perceived geopolitical risks encouraged investors to rotate towards growth-oriented sectors. Expectations for a controlled slowdown strengthened as concerns about energy-driven inflation eased and confidence grew that economic activity would slow without slipping into recession. Information Technology was the best-performing sector by a considerable margin. Strong earnings reports and upbeat outlooks from major technology firms reinforced expectations that AI-driven capital spending is still in its early stages and will continue to bring substantial gains for chipmakers and AI-related tech companies. 

Emerging market equities delivered strong gains in May, outperforming the developed markets index. Performance was led by index heavyweights Korea and Taiwan amid strong gains in memory and semiconductor stocks from continued AI demand. 

US Treasuries lagged other government bond markets given the robust economic backdrop as investors brought forward expectations for interest rate hikes. German government bond yields ended the month lower, with peripheral markets outperforming. In the UK, the market expects the Bank of England base rate to be held when the committee next meets in June. This helped support an outperformance of UK Government bonds. 

Corporate bonds generated positive total returns and outperformed government bond markets. New Zealand was particularly strong, outperforming the major developed bond markets. 

The High Growth Fund had another good month, up 2.90%, culminating in an impressive twelve-month return of 20.84%. The Fund has a 25% exposure to Technology stocks. This, plus the 6.5% exposure to Emerging Markets, were the main drivers for the good return in May. 

Leading the way was Samsung 40%, Cisco 29%, Infratil 26%, Eli Lilly 16%, Apple 13%, Fortescue Metals 12%, ASML 10%, Mainfreight 10%, RBOT ETF 9%, Schroder GEM 8.5%, DGTL ETF 8% and 2 newcomers Micron Technology and Palo Alto Networks. Over the year we had Samsung return 438%, Caterpillar 153%, Alphabet 121%, ASML 120%, Taiwan Semiconductors 118%, and Cisco 95%. 

The Income Fund recorded its second positive month in a row, up 0.77% for May. The prospect of a ceasefire in the Middle East, and signs that inflation may not be as bad as first predicted, were taken positively by global bond markets around the world. Sovereign bonds performed better than corporate bonds, mainly due to their longer duration, and New Zealand bonds performed better than global bonds. The longer dated bond holdings in the Dimensional Global Bond Sustainability PIE performed ahead of expectations and higher than the shorter dated PIEs. Domestically the Harbour New Zealand Core Fixed Interest Fund returned 1.23%, outperforming the bank term deposits and global bond funds. 

The Focused Growth Fund had another positive month in May, up 3.03%. The technology led recovery was the main driver for the fund performing well. The Fund has over 50% of its holdings technology stocks or stocks closely related to the AI-recovery. Top performers in May were the newest addition Cisco System +29.4%, Eli Lilly +16.5%, Apple +13.2%, and Microsoft +8.8%. 2 stocks that struggled in May were Walmart and JP Morgan Chase. 

The Fund now has 12 months of history. The performance has been excellent, up 27.25%. The main drivers of this have been Alphabet +121%, TSMC +118%, Nvidia +56%, Apple +56%, Eli Lilly +50%, Amazon +32%., AstraZeneca +31%, and Schneider Electric +28%.  

The Cash Fund continues to perform its function well, producing +0.22% for the month of May. The Fund has been going for over twelve months now, returning 2.77% and never having a negative month return. 

Our Lifestages profiles performed well across the board, with all asset classes providing a positive contribution. Profiles with a higher weighting to growth assets performed better than the more conservative profiles – the returns ranged from +2.92% (0-49 profile) to +1.33% (65+ profile).