What’s the market mood at the midpoint?

With the midpoint of the year upon us, it’s been a mixed bag (and at times, a rollercoaster) for investors.

Somewhat ominously, it feels like 2025 is just getting started.

We’re at a crucial crossroads and there’s no shortage of key events looming in the months ahead.

Financial market returns haven’t been too bad, despite the volatility.

World shares are up 5.8 per cent so far this year, which is a little ahead of the long-term average.

However, under the hood there’s been a major divergence in the moves.

The S&P 500 in the US is slightly higher, but that nondescript return hides an 18.9 per cent slump followed by a near-20 per cent rebound.

Other markets have been stronger with UK, Europe and emerging market shares posting gains of 6-10 per cent during the first half.

Currency moves have accentuated this divergence for New Zealand investors.

A weaker US dollar has pushed S&P 500 returns into negative territory, while a stronger euro and British pound have supercharged the gains in those markets.

Local shares have been disappointing, with the NZX 50 index down about four per cent so far this year.

The housing market has also been soft, with prices falling in five out of the past six months.

Conservative assets have held their own, with domestic fixed income up almost two per cent, while gold has had a stellar year amidst rising uncertainty.

The shiny stuff might remain well-supported given the geopolitical and fiscal backdrop, but after a 30 per cent year-to-date gain it’s getting difficult to make a value-based argument.

Put all that together and a typical middle-of-the-road investor has probably seen their portfolio go sideways this year.

With a plethora of risk, volatility and reasons for worry, that might feel like a lot of anxiety for little reward.

Six months is a very short timeframe in the world of investing, so keep that in mind.

Looking ahead to the second half of the year, it’s hard to see any let-up in the action.

There are several tariff-related deadlines coming up.

A key one is July 9th, when the temporary tariff truce for most countries is due to expire, potentially pushing tariffs back to those proposed in early April.

Another significant date is August 12th, when a 90-day tariff reduction between the US and China is scheduled to end.

If we get past those milestones unscathed, the fiscal situation could be the next pain point for the US economy.

The so-called “big, beautiful bill” is currently making its way through Congress in the US, after narrowly clearing the House by a single vote a few weeks ago.

The sprawling piece of legislation centres on extending the 2017 tax cuts from Trump’s first term (which will otherwise expire), and his self-imposed delivery deadline of July 4th is fast approaching.

However watered down it looks by the time it finds its way back to the Oval Office, the US debt and deficit position will remain a focal point for markets.

Earlier this year the US 10-year bond yield hit its highest level since it briefly touched five per cent back in 2023 (for the first time in 16 years).

It’s averaged around 4.5 per cent for most of this year, higher than many would like but nothing too alarming.

Here in New Zealand, we’re all counting on the long-awaited economic recovery emerging over the balance of this year.

The last GDP report looked good on the surface, but under the hood things are mixed.

Outside of agriculture, many businesses are still doing it tough.

Lower mortgage rates will be helping households, with the one-year rate below five per cent now, well down from 7.3 per cent 18 months ago.

However, we’re approaching “as good as it gets” territory now, with interest rate markets suggesting there might be just one final Official Cash Rate cut from here.

We’ve had a big six months and buckle up, there’s plenty more to come.

That doesn’t mean we should be fearful though, nor should we sit on the sidelines and do nothing.

Periods of volatility always throw up opportunities, as anyone who did a spot of bargain hunting in April will testify.

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