Welcome to the first issue of InPrivate for 2025. I hope your summer has been enjoyable – despite the La Niña wind and wet – and that you’ve had time to rest and recharge.
It’s a tale of two halves as we head into the year. Significant revisions to previous figures show that New Zealand was in a deeper than expected recession in the September quarter; on the other hand, US equities enjoyed a strong finish to 2024, with several markets reaching record highs. Global bond markets were mostly lower, held back by the idea that interest rates would not fall by as much, or as quickly as previously expected. We explore that in more depth in this edition.
What lies ahead for markets in 2025? Coming off another strong year for global equity markets, things appear more balanced as the year begins to unfold. On one hand, equities look expensive on a valuation basis; however, President Donald Trump’s business-friendly policies should be positive for companies. You can read our market outlook for 2025, including how we expect things to play out in the coming months.
Finally: a new year brings new reflections–and new plans. Before the year kicks into high gear, it’s a goodtime to think about your estate and what sort of legacy you’d like to leave behind. We offer some tips forestate planning that can help ensure your wishes are carried out the way you intend.
Wishing you a safe season, and all the best for 2025.
Glenn Stevenson
General Manager, ANZ Private
2025 Market Outlook
2024 recap: Equity markets gain, bonds lag behind
It was a very good 12 months for financial markets, with many international equity markets reaching record highs, while international bond markets also performed well as the world’s central banks began to cut interest rates in response to signs of easing inflation.
Supportive of equities was a US economy that showed resilience; it grew at an annual pace of 3.1%, created more jobs than expected, and consumer spending was supported by rising wages.
As we look ahead to 2025, the good news is that economic data suggests the US – and many of the world’s other major economies – should avoid a recession. On the other hand, geopolitical tensions in Europe and the Middle East have been, and continue to be, a risk for markets. Here are some key themes we are looking out for this year.
US should continue to outperform – but equities there look expensive
The US economy was the shining light in 2024, with its share markets outperforming most of its global peers, while the US dollar also rose sharply.
Equity markets there were supported by gains in the ‘Magnificent 7’ – a group of companies that have had a stellar run on the back of continued optimism surrounding the uptake of artificial intelligence (AI). Meanwhile, consumer spending, which makes up two-thirds of the US economy, continues to hold up relatively well.
However, despite the stellar run, we are seeing signs that equity markets are looking expensive. By the end of 2024, valuations - the price investors pay relative to the profits of the company- are at multi-year highs.
New Zealand economy is set to recover
Despite a challenging 2024 in New Zealand, which saw the economy fall into a recession, we expect the worst has passed and the economy should begin to recover in 2025.
Further interest rate cuts should support lending and be a net positive for households and business, while it appears the central bank has inflation under control – an important factor as some global economies are showing signs that progress on inflation may have stalled.
We are optimistic, but mindful of external risks
As we look ahead to 2025, we are optimistic about financial markets, despite recognising the challenges posed by geopolitical risks.
A major concern is potential policy shifts under a Trump presidency, notably renewed trade tensions and tariff threats, which could disrupt global supply chains and investor confidence. This could lead to higher inflation and a slower pace of monetary easing.
The ongoing war in Ukraine remains a source of instability, affecting energy markets, food security, and broader geopolitical alliances. Additionally, tensions in the Middle East remain a risk to economic stability, despite the recent ceasefire between conflicting parties. Further disruptions in the region could impact oil markets.
Despite these changes and the evolving investment landscape, ANZ Investments remains committed to active investment management. We will continue making thoughtful decisions to help our investors achieve their financial goals.