April proved to be a markedly different month from March, despite ongoing tensions in the Middle East. While the Israel-US conflict with Iran remained unresolved and disruptions to shipping through the Strait of Hormuz persisted, markets became more comfortable looking through the near-term geopolitical risks. Oil prices remained elevated and consumers around the globe felt the pain at the pump, but fears of a worst-case supply shock eased somewhat as ceasefire discussions emerged and release of strategic oil reserves helped to cushion supply disruptions. This shift in sentiment allowed equities to rebound strongly after March’s sharp sell-off.

Equity markets staged a powerful rally globally, (notwithstanding the flat domestic market) recovering much of March’s losses. US equities surged with the S&P 500 and Nasdaq 100 reaching new highs as investors rotated back into growth and AI-related stocks. Semiconductors and hardware performed particularly well, reflecting strong earnings updates and continued capital expenditure linked to data centres and AI. Emerging Markets were standout performers, led by Taiwan and South Korea, as the AI supply chain rallied aggressively. Europe and Japan also posted solid gains, although performance was uneven across sectors.

Sector performance was more balanced than in March. Energy stocks continued to benefit from high oil prices but underperformed the broader equity rally as investors rotated into previously oversold growth sectors. US tech was the clear standout after being heavily sold in March (in particular legacy software companies vulnerable to AI disruption), while consumer discretionary stocks also recovered as recession fears faded somewhat. Defensive sectors lagged during what was very much a ‘risk-on’ month.

Bond markets were relatively stable with the Bloomberg Global Aggregate Index slightly into positive territory (when measured in NZD). Elevated oil prices kept inflation concerns alive, limiting the upside in government bonds – yet yields stabilised as central banks continued to emphasise patience and data dependence. Credit markets benefited from the improvement in risk sentiment, with spreads tightening modestly.

Australasian markets also improved with the Australian ASX 300 Index returning 4%, supported by large-cap resource and financial stocks. Ongoing concerns around domestic growth and higher funding costs continued to cap upside for NZ stocks, leading to near nil (flat) result for the month.

The New Zealand Dollar stabilised during April. After falling sharply in March, the NZD recovered modestly against the US Dollar, trading back toward 0.59 as global risk sentiment improved and the USD softened. Against the Australian Dollar, the NZD continued to trend lower, reflecting stronger Australian growth and commodity exposure.

April was quite the turnaround for the Portfolios, with all profiles returning positive results for the month having benefitted from the broad global rally, including strength in Australasian Equities. The market sentiment has improved, and investors are looking through the geopolitical risk of the ongoing US-Israel conflict with Iran, back towards the future. The AI buildout and associated capex spend continues to gain steam and we look forward to another busy month navigating the markets on your behalf.