Lyfords Fourth Quarter 2025 Newsletter
For full detailed commentary, charts, and data available click on the link: 2025.Q4 Economic Commentary
As we close out 2025, global markets showed remarkable resilience despite significant headwinds including trade policy uncertainty, tariff impacts, moderating inflation, and shifting central bank policies. In our latest quarterly commentary, we review the key economic developments and outline what investors can expect heading into 2026.
Global Backdrop
Major economies experienced a mixed but ultimately positive year. The US delivered surprisingly robust growth in parts of 2025, driven heavily by technology and AI-related investment, even as tariffs introduced volatility and higher input costs. Equity markets reached new highs across major indices, rewarding long-term investors despite early-year turbulence. Interest rate cuts occurred against a backdrop of still-solid economic activity — a historically favorable setup for risk assets.
Inflation continued to ease in most developed markets, allowing central banks (including the RBNZ) more flexibility, though stubborn services inflation and geopolitical risks remain watchpoints.
New Zealand
Domestically, the NZ economy showed signs of stabilisation after a prolonged adjustment period. Lower interest rates supported household and business confidence, while the export sector benefited from a softer NZD. However, challenges persisted in housing affordability, consumer spending patterns, and the agricultural outlook amid global trade frictions.
Investment Insights
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- Equities outperformed fixed income again in 2025, underscoring the long-term premium for owning productive assets.
- Term deposit rates continued to look unattractive on an after-tax, after-inflation basis — reinforcing the case for diversified portfolios.
- AI and technology trends remain a powerful structural driver, though market wobbles highlighted the need for valuation discipline.
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Looking Ahead to 2026
While uncertainties around global trade policies and geopolitical developments linger, the underlying trend points to continued (if moderate) growth. Our base case sees the NZ and global economies avoiding recession, supported by easing monetary conditions and productivity-enhancing technologies.
We continue to advocate a balanced, long-term approach: stay invested, diversify across asset classes and geographies, and avoid reactive moves based on short-term noise.
Full detailed commentary, charts, and data available: 2025.Q4 Economic Commentary