Market Update: Looking beyond market turbulence

Over the past few months, many people have felt uncertainty in areas well beyond the financial markets we normally comment on. Rising living costs, persistent inflation and ongoing geopolitical tensions have created a sense that the world feels less predictable than usual. We’ve experienced it in filling up the car feeling like a luxury, grocery receipts seeming to creep up faster than streaming subscription prices, through to constant news alerts about problems throughout the world.

If it’s felt a little noisy, you’re not wrong. Headlines have been loud, frequent, and occasionally dramatic. The past few months have been marked by renewed tension in the Middle East, prompting periods of volatility across global stock and oil markets. Throughout this, history reminds us that markets are not passive observers of events but instead active processors of risk and as they tend to do, have been resiliently getting on with the job. They continuously absorb new information, reprice risk, and adjust expectations in real time. Even during periods of uncertainty, capital keeps moving, businesses keep operating, and long-term trends continue to take shape beneath the surface. While prices may move in the short term, the underlying process remains steady. Markets are reacting to new information rather than standing still. For long-term investors, this is a reminder of the importance of staying focused on their broader plan rather than reacting only to short-term headlines.

Let’s unpack what’s happening

Middle East issues remain a key short-term macro driver of markets. At the time of writing we’re still seeing continued disruption of oil supply through the Strait of Hormuz. This pushed oil prices above US$100 a barrel at times, adding to inflation pressure alongside other higher commodity prices. As we write this, a tentative peace plan appears agreed but only time will tell if it holds. It will take time for global supply chains to recover from the disruptions so uncertainty will remain for a while longer.

The general sentiment among central banks is a shift back to caution. An alignment in global monetary policy is becoming increasingly evident in 2026 as most central banks hold rates steady after previously indicating rates cuts were likely. The ECB bucked the trend by raising rates in June by 25 basis points. In short, this means making borrowing more expensive which cools down inflation and usually strengthens that currency. The RBNZ, along with many other central banks, has maintained the official cash rate at 2.25%. The Monetary Policy Committee delivered a split decision at its May meeting signalling rising concern over persistent inflation. They indicated further rate increases may be needed to support inflation returning to target, with the RBNZ focused on bringing inflation back to 2% within its 1-3% target range.

Consumer spending is holding up but real purchasing power is weakening due to rising fuel and food costs. And let’s not forget about the rise of Artificial Intelligence (AI) where investment estimated at around US$2.9 trillion globally through to 2028 continues to drive economic momentum, corporate earnings as well as likely shaping labour markets for the next decade or so.

Investing is a long-haul flight and headlines are just the turbulence

Despite everything going on, global equity markets have continued to move forward. The S&P 500, for example, rose around 5% across the month of May alone supported by global technology demand. This growth is based off corporate earnings which have remained strong, with U.S. earnings growing by approximately 30% year-on-year. Emerging markets have also outperformed, returning approximately 10% in May, reflecting shifting leadership within global markets and reinforcing the benefits of diversification.

Investor resilience during this period reflects how markets can recover as uncertainty begins to clear. Historically, market reactions to geopolitical shocks have often been sharp but relatively short-lived. Markets appear to have absorbed much of the initial shock and are now in a period of ongoing adjustment.

More broadly, long-term data reinforces this perspective. Looking across twenty major geopolitical events, the S&P 500 has often experienced an initial fall before recovering over time. The average recovery period was approximately 28 trading days, although the timeframe varied significantly depending on the event. For example, during the Russia and Ukraine conflict the S&P 500 fell 7.4% but took only 27 days to return to even.

Well-constructed portfolios are not engineered to avoid disruption. They are built to endure it. If you can remember one key takeaway from this article let it be the importance of diversification. Diversification across asset classes, regions, and sectors provides multiple engines of return, cushioning against shocks and reducing dependence on any one outcome. It is precisely during periods of market stress that this architecture proves its value, not as a theoretical concept, but as a practical safeguard that reinforces diversification as the cornerstone of resilient investing.

Markets look ahead, not around

One of the easiest traps during a volatile market is to focus too heavily on what’s happening right now. Markets, however, are not built that way. They are forward-looking by design. We’ve already seen this in recent months. Periods of optimism around potential de-escalation and the proposed peace treaty have been met with market gains, while renewed tensions have led to short-term pullbacks. It’s not a case of acting blindly but rather a case of continuously weighing possible outcomes and adjusting accordingly.

Staying invested

Periods like these are often when investing feels hardest yet they are the most important times to stay disciplined. Volatility, while uncomfortable, is a necessary component of long-term returns. For many long-term investors, stepping aside during periods of volatility can create its own risks, including the risk of missing a recovery.

Because by the time everything feels calm again, markets have often already moved. Instead, long-term investors recognise that risk is part of the process. It’s not something to avoid completely. It’s something to understand, manage, and price in.

Final thoughts

It’s natural to focus on what could go wrong, especially when the news cycles are persistent. But stepping back, the broader picture is clear:

• Volatility reflects markets adapting, not breaking.
• Many parts of the global economy have shown resilience.
• A long-term investment approach can play an important role in supporting retirement goals.

At NZBritannia, our focus remains unchanged. We continue to build portfolios designed to navigate a wide range of market conditions recognising that uncertainty is not an obstacle to investing, but a feature of it. Staying invested can help support long-term retirement outcomes, provided the investment strategy remains appropriate for the investor’s needs, timeframe, and risk profile. After all, the goal isn’t to avoid the turbulence, it’s to stay on course and reach your destination.

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The information contained in this publication is intended for general guidance and information only. It has not been personally prepared for you. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult with us before making any investment decision. Historical market performance may not be indicative of future market performance.

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