Market winners & losers after six months of extreme volatility

Although a sense of relative calm has returned to markets after the ceasefire between Israel and Iran, they remain volatile after six months of volatility

The first half of 2025 has been marked by extreme volatility in global markets, primarily influenced by geopolitical events and economic policy shifts. Early in the year, US missile attacks on Iran caused a brief surge in oil prices, sparking fears of instability in the Middle East. However, a ceasefire brokered by the US between Israel and Iran helped calm markets, resulting in a 12% drop in oil prices, marking the biggest weekly fall since March 2023.

US markets saw dramatic swings in sentiment, with a sharp decline in stock values following President Trump's aggressive tariff announcements, but the subsequent pause in tariff implementation led to a strong recovery. The S&P500 closed at a new all-time high by mid-year, though the NZX50 remained down 3.7%.

The year began with optimism, fuelled by expectations of tax cuts and pro-business policies under Trump's re-election. However, markets were rattled by trade tensions and fears of a global recession, leading to a 20% drop in the S&P500. Despite this, investor sentiment improved as the US economy remained resilient, with a focus shifting to AI and growth.

On the commodity front, gold and Bitcoin were among the top performers, gaining 24.2% and 14.9%, respectively. Meanwhile, oil prices fell by 10.1% amid easing concerns about global supply disruptions. The US dollar experienced its largest drop in years, down 10.4%, with international sentiment toward the dollar weakening.

In New Zealand, the local market saw strong performances in sectors like agriculture, horticulture, and seafood. Companies such as A2 Milk, Sanford, Fonterra, and Turners Automotive delivered solid returns. However, the construction, retail, and hospitality sectors faced challenges, with companies like Ryman Healthcare and KMD Brands suffering significant losses.

The outlook for the second half of the year remains uncertain, with ongoing concerns about US debt, trade policies, and the sustainability of global economic growth.

WHY 2025 BUDGET IS SO WELCOME

Finance Minister Nicola Willis

A lot of people are talking about how small this Budget seems — with only $1.3 billion in new spending, it's the smallest in decades. But that misses the bigger picture. When you add up all the actual decisions, like changes to tax credits and more money for learning support, the government is really spending about $6.7 billion a year. That’s a huge amount — possibly even more than what Labour spent in some of their recent budgets.

What’s different this time is where the money is coming from. About $4.8 billion was found by cutting spending in other areas and redirecting it. Around $600 million is from new fees or charges, and only $1.3 billion is borrowed. That’s a big change from the last Labour Government, where Grant Robertson borrowed more to pay for new spending - and what's more it was the lack of accountability that drove hugely wasteful spending that actually achieved very little.

Personally, I much prefer paying for priorities by cutting wasteful spending rather than by borrowing huge amounts of money.

THE HISTORY OF NORWAY’S STATIOL & LESSONS FOR NEW ZEALAND

Five decades of progress

Statoil, the Norwegian State petroleum company, was formed by a decision of the Norwegian parliament to be the government’s commercial instrument in the development of the oil and gas industry in Norway. Five decades later, this company has become the largest supplier of energy to Europe, a world-leading offshore operator, the largest oil and gas operator in Norway, and an international pioneer in renewables and low-carbon solutions. In 2018, they changed their name to Equinor.

Equinor ASA was listed in 2001, with a 67% majority stake owned by the Norwegian State. Today, it is a diverse company with a long-term strategy and development as a broad energy company in addition to reflecting their evolution and identity as a company for the generations to come. They have an ambition to be a leading company in the energy transition and to become a net-zero company by 2050, including emissions from production to final energy consumption. Today, they are evolving into a broad energy major, with a significant and growing renewables business.

There is an excellent lesson here for an opportunity that has long been available for New Zealand. Several Asian countries have used this model to grow their natural wealth, and New Zealand can’t afford to miss this opportunity any longer. This is a no-brainer and could easily be funded by the same of 100% government owned Pāmu (Landcorp Farming Limited).

 Pāmu has huge assets (149,000 hectares of valuable land – including 84 individual farms) that continues to provide a very sub-optimal revenue stream to central government. Some say that this land is being held for “Treaty settlements”. I say sell it to fund a “Statiol” type wealth fund, so that all New Zealanders benefit.

Pāmu reported a $26 million Net Loss after Tax in 2024. There is no case to retain Pāmu’s farming enterprise. The Net Equity of $1.6 billion available needs addressing – and Oil & Gas seems a much better bet to me.