It wasn’t just technology that stood out. Precious metals also had an exceptional year, with both gold and silver performing very strongly.
Closer to home, New Zealand and Australian markets didn’t match the strength of the US, but still delivered positive returns and pushed to new record highs. There were also some standout individual stock performances. A2 Milk surged around 70% and Freightways rose more than 35%.
Across the Tasman, property group Charter Hall climbed roughly 35% after being added to the portfolio in May.
Overall, 2025 was a fascinating year for markets, and once again highlighted the benefits of an active approach to investing.
Turning to 2026
Looking ahead, 2026 is already shaping up to be another interesting year, and it has certainly started that way. US President Donald Trump has wasted no time making headlines, from orchestrating the capture of Venezuela’s President to floating the idea of the United States acquiring Greenland. Meanwhile, in recent days the US Justice Department has opened a criminal investigation into Federal Reserve chairman Jerome Powell. While the headlines can be noisy, stepping back reveals several important themes emerging beneath the surface.
At a broad level, we see global equity markets continuing to push higher over the course of the year. Our base case is that a US recession is avoided, while central banks remain broadly supportive. Even with inflation still sitting above target, we expect a newly appointed Trump-backed Federal Reserve chair to help direct two rate cuts during 2026.
Inflation itself has taken on a new dimension. Trump has flagged his intention to exert control over Venezuela’s oil reserves, the largest in the world. How this situation evolves remains uncertain, but it reinforces the idea that geopolitics will once again be something investors need to navigate carefully.
For some investors, heightened geopolitical tensions can feel unsettling, but periods of volatility often create opportunities for active managers to take advantage of temporary market dislocations and shifting sector dynamics in ways that passive approaches simply cannot.
Despite these risks, we expect investor confidence to remain reasonably robust. 2026 could also be a year when merger and acquisition activity picks up, particularly within the technology sector.
Technology, AI and beyond
While we don’t believe the AI narrative is about to burst, we do think the distinction between winners and losers will become much clearer. While a rising tide has lifted many boats in the sea of AI names, execution will matter far much more from here – and those who don’t do this well could be in for choppier waters.
This is while valuations in parts of the market (particularly US mega-cap technology) are no longer cheap. That reinforces our focus on selectivity and active positioning rather than broad, indiscriminate exposure.
Nonetheless as a narrative, AI is set to remain dominant, as are themes around it. One of these is power, which AI requires enormous amounts of. We see power generation and energy infrastructure as major beneficiaries as hyper-scalers such as Microsoft, Amazon and Google continue to expand data-centre capacity at pace. Demand for reliable, scalable energy solutions is only just beginning, and we believe we are still in the very early stages of products and services being built on this technology.
Another area we see gaining real momentum is robotics. Automation is becoming essential for lifting productivity, reducing costs and addressing labour shortages across a wide range of industries, and we see robotics having a potential breakout year.
Outside technology (although there is a relationship of sorts), waste management is another theme we find increasingly attractive. Global waste volumes are expected to increase by around 70% by 2050 if current trends continue, driving long-term demand for more efficient recovery, recycling and waste-to-energy solutions.
New Zealand and Australia
Closer to home, we see the Australian market pushing to new record highs. The Reserve Bank of Australia is expected to begin its rate-cutting cycle against the backdrop of a relatively resilient economy, supported by a recovery in China that could surprise on the upside.
In New Zealand, we also expect the market to make new highs. Investor appetite is likely to grow for electricity companies, property and cyclicals that appear to have bottomed. The dividend appeal of the local market should also come back into focus, particularly with interest rates expected to remain relatively low.
There is a new Governor at the Reserve Bank of New Zealand, and we expect Ana Breman to make her mark alongside a refreshed leadership team. Offshore pressures pushing borrowing rates higher remain a risk, and in our base case the RBNZ keeps rates on hold this year. That said, if the recovery stumbles, we wouldn’t rule out another rate cut in the first quarter.
Looking further ahead, we expect the New Zealand economy to show a much stronger second half, as early green shoots become more visible. The Fonterra payout and its flow-on effects should also provide support.
And of course, it’s an election year. We expect a tightly contested race, with capital gains tax and potential KiwiSaver reforms shaping up as key areas of debate.
What does this mean for investors?
For KiwiSaver members and long-term investors, the key takeaway for this year again is not to be distracted by short-term noise. Markets will continue to react to headlines around politics, inflation and geopolitics, but retirement savings are built over decades, not months. With interest rates expected to remain relatively low, the case for maintaining exposure to growth assets such as shares remains strong, particularly for those with longer time horizons.
At the same time, higher market valuations and greater dispersion between winners and losers reinforce the importance of diversification and active management. Staying invested, regularly reviewing fund settings, and ensuring portfolios are positioned for long-term themes (rather than just chasing last year’s winners) is likely to be far more important than trying to time markets in the year ahead.
Generate is a New Zealand-owned KiwiSaver and Managed Fund provider managing over $8 billion on behalf of more than 180,000 New Zealanders.
This article is intended for general information only and should not be considered financial advice. All investments carry risk, and past performance is not indicative of future results. To view Generate’s Financial Advice Provider Disclosure Statement or Product Disclosure Statement, visit www.generatewealth.co.nz/advertising-disclosures. The issuer is Generate Investment Management Ltd.
Catch up on the debates that dominated the week by signing up to our Opinion newsletter – a weekly round-up of our best commentary.