Global markets
April marked the strongest month for global equities since November 2020, with major indices rallying sharply despite ongoing geopolitical tensions. The MSCI World Index rose 9.5% in US dollar terms, supported by strong earnings (particularly in the technology sector), continued momentum in AI investment, and a still-resilient global economy.
A key driver of the rebound was a perceived easing in Middle East tensions, following a ceasefire agreement between the US and Iran. While the situation remained fragile, the shift from escalation toward negotiation helped reduce fears of a prolonged oil shock and supported a recovery in risk sentiment. That said, oil prices themselves remained volatile and headline-driven.
The macro backdrop remained supportive, but increasingly complex. Growth has held up (particularly in the US) while other regions are more mixed. Headline inflation has been boosted by higher energy prices, while core inflation is more contained. The key risk is whether these pressures broaden into second-round effects, keeping inflation elevated for longer.
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Central banks have played an important role in supporting equity market sentiment. In the face of rising geopolitical tension and higher oil prices, policymakers have largely resisted reacting aggressively. Rather than tightening policy in response to a supply-driven shock, most have adopted a measured “wait-and-see” approach. The Federal Reserve, European Central Bank, Bank of England, Bank of Japan and Bank of Canada all held rates steady during the month.
This has helped anchor expectations and provided a foundation for equity markets, allowing investors to focus on earnings and economic resilience.
However, fixed income has been more volatile, reflecting uncertainty around how persistent inflation may prove if higher energy prices and fiscal spending continue. Expectations have shifted from rate cuts toward the possibility of hikes, depending on the data.
While central banks have provided some stability, uncertainty remains, and from an investment perspective, that volatility has created opportunity.
Earnings have been a key pillar of support for investor sentiment during the month. Over 80% of S&P 500 companies (of the ~70% of companies that have reported to date) have beaten expectations, with technology leading the charge. The AI story remains intact and broadening, with semiconductor companies such as Taiwan Semiconductor delivering strong results. Importantly, AI adoption remains early, suggesting a long runway for growth.
US markets
US markets led the global rally, with the Nasdaq surging 15.3% and the S&P 500 rising 10.4%, both reaching record highs. The Dow Jones jumped 7.1%, and the smaller cap Russell 2000 surged 12.1% to a new all-time high.
Earnings have been central to this strength, particularly in the technology sector, where first-quarter earnings growth is tracking above 40%. Companies including Microsoft, Alphabet and Amazon delivered robust results, driven by continued momentum in their AI and cloud businesses. More broadly, earnings have reinforced the resilience of the US economy, a trend also highlighted by Apple’s standout result, with the iPhone 17 proving its most popular launch to date.
Macro data has supported this, although with emerging pressure points. Retail spending remains solid and business activity is expanding, but consumer sentiment has fallen sharply as higher fuel costs weigh on households and inflation expectations rise.
Labour market data highlights a more nuanced picture. Job creation in the US remains solid, but participation has declined and wage growth has moderated. This suggests the labour market is cooling rather than accelerating - an important dynamic in reducing wage-driven inflation risk.
Inflation remains a key focus. As with many other countries, headline inflation is increasing, largely driven by energy, but core inflation remains more contained.
Against this backdrop, the Federal Reserve maintained a cautious stance, holding rates as expected during the month. The decision was split 8-4—the highest level of dissent since 1992. Importantly, this was not a simple divide. One member favoured a rate cut, while others objected to language implying an easing bias, signalling a more balanced policy outlook.
This highlights the challenge facing the Fed - balancing energy-driven inflation against an uncertain growth outlook. At the post-meeting press conference, outgoing Fed Chair Jerome Powell reinforced a “wait-and-see” stance.
European and Asian markets
European markets delivered more modest gains amid increasing signs of economic weakness across the continent. Growth has been weighed down by a combination of factors, including higher energy costs, softer global demand, and tighter financial conditions. Europe’s closer proximity to the Middle East has also made it more exposed to the conflict, particularly through energy markets and trade flows, amplifying the impact of the oil price shock.
Inflation remains elevated, and while underlying pressures have eased somewhat, the energy shock risks delaying further progress. The European Central Bank and the Bank of England have remained cautious, holding rates during the month, balancing weaker growth against persistent inflation.
Across Asia, performance was strong. Japan’s Nikkei surged 16.1%, supported by improving earnings and policy normalisation. The Hang Seng rose 3.9%, while the CSI300 surged 8.0%. China has shown signs of stabilisation, with GDP growth around 5% and stronger industrial output and exports. However, the recovery remains uneven, with weak domestic demand and pressure in the property sector. A standout in Asia was South Korea with the KOSPI soaring 30.1%. The move was driven primarily by strength in semiconductor stocks, with companies such as Samsung Electronics and SK Hynix benefiting from continued momentum in AI-related demand. The rally was also amplified by a broader global risk-on environment.
Australian markets
The ASX 200 rose around 2.2% over April, giving back earlier gains late in the month. The technology and property sectors rebounded. Financials were broadly steady. Energy was weaker, as were consumer staples. Healthcare was also weaker, following profit warnings (hearing implant manufacturer Cochlear being the most notable) from large cap names that dented investor confidence.
A key development was the re-acceleration in inflation, which was already an issue prior to the war. Late-month data showed headline inflation rising to around 4.6%, the highest since 2023, driven by fuel but with broader pressures across housing, transport, and utilities. Core inflation at 3.5% remains elevated. Post month end, the Reserve Bank of Australia raised rates for the third time this year, increasing the cash rate to 4.35%.
While there are pockets of resilience (including housing), economic momentum is softening. Cost-of-living pressures are weighing on Australian consumers, and companies are flagging margin pressure and weaker demand. Post the month end several major banks reported solid but unspectacular results, with tighter competition, slower credit growth, and rising provisioning.
New Zealand markets
The NZX 50 underperformed global markets, finishing April 0.1% lower. Companies such as Ryman Healthcare, Fisher & Paykel Healthcare, Infratil and Auckland Airport delivered modest gains, supported by a combination of improving fundamentals, defensive earnings profiles and exposure to longer-term structural themes. On the downside, a2 Milk was a notable underperformer, falling sharply following a downgrade to its outlook. More broadly, consumer-facing and construction-related names came under pressure, reflecting weak sentiment and the impact of rising cost-of-living pressures on discretionary spending.
The domestic backdrop is becoming challenging. Inflation remained above the Reserve Bank’s target, coming in at 3.1% for the March quarter, with higher fuel and energy costs re-emerging as a key driver. While some underlying pressures have eased, domestic costs - particularly across housing and utilities - remain elevated, pointing to ongoing stickiness.
Against this backdrop, the Reserve Bank of New Zealand left rates unchanged at its April meeting, as expected, adopting a cautious, “wait-and-see” approach. Policymakers signalled they are willing to look through near-term energy-driven inflation, focusing instead on whether these pressures become more persistent - particularly through wages and inflation expectations.
The messaging was consistent with other central banks globally. While inflation remains above target, the RBNZ appears reluctant to react aggressively to what is largely a supply-driven shock, particularly given the softer domestic growth outlook.
Business surveys meanwhile show a clear deterioration in sentiment. The ANZ Business Outlook highlighted falling confidence, with activity, hiring and investment intentions weakening. PMI data shows divergence - manufacturing remains in expansion, while services are in contraction - suggesting uneven momentum. Spending data reinforced this. Card transactions rose modestly, but largely due to fuel costs, with discretionary spending weak.
There are some offsets. The export sector remains strong, supported by firm pricing, and a weaker NZ dollar. Dairy remains a key pillar, with Global Dairy Trade auctions strong overall this year, and the Fonterra payout supporting the rural economy. A weaker currency has also been a key driver of our tourism sector - visitor arrivals are running at more than 3.5 million annually and are back near pre-Covid levels.
Turning market uncertainty into opportunity
Periods of volatility often create opportunity - and April has been a clear example.
When the conflict began, risk assets sold off sharply. At the time, our view was clear: for long-term investors, the best course of action was to stay invested. This wasn’t based on blind optimism, but on experience. Periods of geopolitical stress are a regular feature of financial markets, and history shows that whether it be trade wars, Ukraine, COVID or the GFC, these events often prove to be temporary disruptions within a longer-term upward trend.
Markets have always climbed a wall of worry historically. Short-term volatility is typically driven by fear and uncertainty (what might happen) while long-term returns are driven by fundamentals (what actually does happen). Markets may act as a voting machine in the short term, but a weighing machine over time.
April’s strong rebound is a timely reminder of that dynamic. It reinforces how quickly markets can recover and how difficult it is to time them, highlighting the importance of staying the course.
Against this backdrop, the Generate investment team remained active throughout the volatility. We used periods of market weakness as an opportunity to add to high-quality companies where we have strong conviction in their long-term growth potential.
In practice, that meant leaning into areas where we see structural tailwinds, including AI-driven businesses such as Nvidia, Microsoft and Micron, alongside new positions like ARM Holdings. Importantly, this activity was not limited to technology - we also added to companies such as United Healthcare.
This approach translated into strong performance during the month, and is a good example of how active management, combined with a long-term mindset, can turn periods of uncertainty into opportunity for investors.
Looking ahead - market outlook
Geopolitical developments remain front of mind, particularly the path of the Middle East conflict. Whilst recent developments have reduced the likelihood of worst-case outcomes, the situation remains fluid, and any shift in escalation or de-escalation is likely to continue driving volatility - particularly through energy markets.
Central banks will also remain a critical influence. Policymakers globally are navigating a complex backdrop, balancing energy-driven inflation pressures against an uncertain growth outlook. For now, the prevailing approach remains one of patience, but the path forward will ultimately depend on how inflation and activity data evolve.
Economic data will be closely watched for further signs on the direction of growth and inflation. In the US, labour market data, inflation readings, and activity indicators will provide important signals for the Federal Reserve. In New Zealand and Australia, upcoming data - including inflation, labour market trends, and business surveys - will offer further insight into domestic momentum and policy outlooks.
Earnings will remain another key driver. The remainder of the US reporting season, including major technology companies (such as Nvidia) and consumer-facing businesses (including Walmart and other large US retailers), will provide further clarity on the strength of the AI investment cycle and the resilience of demand more broadly. In New Zealand, the local reporting season will also come into focus, with key companies including Fisher & Paykel Healthcare, Infratil and Mainfreight due to report.
Against this backdrop, uncertainty is likely to remain a feature of markets. From our perspective, that is not something to be feared, but something to be managed.
As recent months have demonstrated, periods of volatility can create meaningful opportunities. We remain focused on staying active and disciplined - continuing to assess new opportunities as they arise, while positioning portfolios to benefit from long-term structural growth trends.