Market, meet your new Fed Chair

Key market movements

• Global equities got off to a strong start despite renewed geopolitical tensions. The MSCI ACWI fell 2.1% in NZD terms but rose 2.3% for NZD‑hedged investors, with currency moves dominating performance as US dollar softness offset solid underlying global momentum.
• New Zealand and Australian equities were mixed. The S&P/NZX 50 declined 0.9% as local markets lagged the global tone, while Australian shares gained 1.8% in AUD and 1.5% in NZD terms, supported by firmer risk appetite across the region.
• Bonds were broadly steady. Global bonds (NZD‑hedged) rose 0.1%, reflecting contained volatility even as Japan saw outsized moves in long dated yields. The Bloomberg NZ Bond Composite slipped 0.3% as domestic yields drifted slightly higher.

Key developments

Global equities started the year strongly in January, with gains broadening beyond last year’s narrow leadership despite a steady flow of geopolitical headlines, including developments involving Venezuela, renewed Middle East tensions and ongoing debate about US policy and Federal Reserve independence.

Resilient US activity data, particularly stronger services indicators, supported risk appetite and reinforced a “run the economy hot” narrative, helping cyclical and higher‑beta markets outperform as investors focused on earnings delivery and continued AI‑related investment. At the same time markets were buffeted by geopolitical events that increased interest rate, currency and commodity volatility.

Through most of the month investors continued to sell the US dollar and rotate into gold and silver, reflecting concerns about a widening US fiscal deficit and a weakening Federal Reserve. Precious metals rallied sharply before reversing late in the month after President Trump’s Fed Chair announcement was seen as supportive for the US dollar.