05/10/2026
Some Perspective on Today's Markets:
It's completely understandable to feel uneasy when headlines are dominated by stories about inflation, interest rates, geopolitical tensions, government debt, and artificial intelligence. When you're investing these concerns can feel very real.
Successful investing has always been about looking beyond today's headlines and focusing on the underlying evidence. When we do that, the picture is considerably more encouraging than the day-to-day news flow might suggest.
• The first reason for optimism is that inflation, one of the biggest challenges facing investors over the past few years, has been steadily moving in the right direction. While the journey has not been perfectly smooth, global inflation pressures have eased significantly from their post-pandemic highs. As inflation has moderated, interest rates have also moved well below their peak levels. Historically, share markets have often performed well in environments where inflation settles into a moderate range, and current trends suggest we are moving closer to that backdrop.
Concerns about rising rates should also be viewed in context. History shows that the first interest rate increases have not typically ended bull markets. In many previous periods of technological innovation and economic expansion, growth in corporate earnings has more than offset the impact of higher borrowing costs.
• Another commonly cited concern is the oil price. While higher energy costs can create short-term uncertainty, today's inflation-adjusted oil prices remain well below some of the extremes experienced over the last fifty years. Oil is certainly something to monitor, but history suggests it is rarely a reason on its own to abandon a long-term investment strategy.
• Closer to home, New Zealand's economic picture is improving. Business confidence has recovered strongly, economic growth has returned to positive territory, and household spending is showing signs of renewed strength. While the recovery remains in its early stages, the direction of travel is encouraging. After several years of moving sideways, New Zealand shares may be well positioned to benefit from improving domestic conditions over time.
• Globally, the United States remains a major driver of equity market returns, and one of the most important indicators we watch is company earnings. Encouragingly, corporate profits have been growing strongly and have exceeded many analyst expectations. Ultimately, earnings growth is what drives long-term share market returns, and the current trend remains supportive.
• Perhaps the most compelling longer-term opportunity is artificial intelligence. While AI dominates headlines, the reality is that most companies are still in the very early stages of translating AI adoption into measurable financial results. History shows that transformative technologies such as electricity, the motor vehicle, and the internet created productivity gains that unfolded over many years and ultimately reshaped entire economies. AI appears to have the potential to follow a similar path.
We are already seeing real-world examples of dramatically improved productivity, lower costs, and faster innovation. If AI continues to develop as many expect, we may still be in the early chapters of a multi-year growth cycle rather than approaching its end.
Of course, uncertainty never disappears completely. Elections, geopolitical events, economic surprises, and market volatility are all inevitable. That is why a well-constructed portfolio remains diversified across income assets, defensive growth investments, and growth assets. This approach helps provide resilience during difficult periods while maintaining exposure to long-term opportunities.
When we bring all the evidence together, the message is clear:
- inflation has eased from its peak
- interest rates are becoming less restrictive
- New Zealand's economy is recovering
- corporate earnings remain strong, and
- one of the most significant technological revolutions in history is still in its early stages.
There will undoubtedly be periods of volatility along the way, and markets rarely move in a straight line. However, for patient investors focused on the next three to five years the outlook remains constructive.
In fact, the combination of improving economic conditions, strong corporate profitability, and the transformational potential of AI gives us reason to be optimistic that the coming year or so could offer some of the strongest growth opportunities we have seen in a long time.
Our view remains one of cautious confidence: stay diversified, stay invested, and stay focused on the long term. The evidence suggests that the foundations for future growth are continuing to strengthen.
