Salt Funds managing director Matt Goodson said it was “not so much the hike” but the 12-0 vote and the “hawkish commentary” over the future stance that saw yields rise – “more at the short end than long end”.
“The first hike is typically a bearish signal for equities, which have been struggling outside a very narrow set of stocks already,” Goodson said.
“It will put huge weight on upcoming inflation outcomes and what they imply for further moves,” he said.
Hamish Pepper, the head of multi-asset and global investments at Harbour Asset Management, said the Fed’s move could have more nuanced implications for the market than the initial reaction would suggest.
“This is a really comfortable situation for a central bank to be able to lift interest rates,” Pepper said.
“Yes, it’s partly because of the oil price shock, but also because the economy is continuing to generate inflation pressure.
“This is very different to what we’re facing here in New Zealand, which is much more uncomfortable with the Reserve Bank having to lift rates because of the oil price dynamic, despite the fact that the economy is pretty weak.”
There may be some fallout locally to the Fed’s hike but he said there were “bigger things going on” in terms of local companies being able to adjust their businesses, control their costs and create efficiencies.
“What we saw in the latest earnings season for the New Zealand market was more of a nuanced story – a lot of firms that were able to still deliver in a challenging environment.”
Markets are pricing in a 60% chance the Fed funds rate rises by another quarter of a point at the next meeting on October 28, with over 100% chance of a hike by December.
For New Zealand, markets are pricing a 65% chance the Official Cash Rate, currently at 2.75%, will be hiked at the next meeting on October 9, and over a 100% chance of one by December.
Lodestone IPO?
Lodestone Energy’s announced plan to become the first NZX-listed solar power company has generated a lot of interest on the back of a strong appetite for renewable energy, fund managers said.
All it needs now is more detail.
“We are certainly open to the opportunity and are keen to see more detail,” Harbour Asset Management portfolio manager Shane Solly said.
Lodestone is inviting indications of interest from investors who may be interested in being part of the company’s next stage of growth.
If an initial public offer proceeds, Lodestone would become the first NZX-listed company focused on utility-scale solar generation.
Super performance
Continued outperformance by global equity markets helped boost the value of the New Zealand Superannuation Fund to $94.4 billion at the end of the 2026 financial year, $9.3b up on the year earlier.
Jo Townsend, the chief executive of fund manager the Guardians of New Zealand Superannuation, said the result followed strong performances by the fund in the previous two years.
Fund returns of 14.17% (after costs and before New Zealand tax) for the 12 months to June 30 were well ahead of the 2.71% return on 90-day Treasury bills for the same period but lagged the Reference Portfolio benchmark by 0.1 percentage points.
The Reference Portfolio is a notional, passively managed portfolio of global equities and bonds that is used to determine the amount of value added by the Guardians’ active investment strategies.
The Reference Portfolio has 80% invested in global equities, while the fund contains a much broader range of assets.
Townsend said the fund’s portfolio, which spans timber, real estate and private market investments as well as listed companies, had performed exceptionally well in delivering such a strong result in the current market.
“In the short term, a concentrated portfolio can achieve strong results; however, over the long term, we firmly believe a more diversified portfolio is better suited to our mandate.”
Insurance reshaped
With under three weeks remaining in financial year 2026 for insurance company Tower, several recent developments could meaningfully shape the industry backdrop over the next 12 months and beyond, Forsyth Barr says.
Over the last month, the confirmation of an El Niño period and the opening of public consultation on the Reserve Bank’s prudential levy, which is expected to come into effect in August 2027, have been key points of interest in the New Zealand insurance market.
In her May Budget, Finance Minister Nicola Willis said there would be a new prudential levy on banks, non‑bank deposit-takers, insurers and other financial market participants to help cover the costs of services provided by the Reserve Bank.
The prudential levy was estimated to recover about $209 million over the next four years, to be paid to the Reserve Bank (RBNZ).
“Our analysis suggests: (1) publicly available historical data show no clear relationship between El Niño periods and either the frequency or severity of extreme weather events in New Zealand; and (2) the RBNZ’s proposed levy appears likely to have only a modest impact on Tower’s earnings under currently proposed frameworks,” Forsyth Barr said.
“Additionally, we expect Tower to announce its 2027 reinsurance renewal during September 2026, where we believe ongoing softness in global reinsurance markets will likely result in lower reinsurance costs over the coming year,” it said.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
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