Despite escalating tensions in the Middle East, share markets remained upbeat in June. The US share market hit record highs as the world's largest economy managed to avoid a recession. Just two short months ago, markets plunged into downturn, due to prolonged US trade tensions and broader economic uncertainty.

US shares rose 5% over the month, while New Zealand's NZX 50 index posted a more modest gain of 1.5%. So far this year, US share markets have seen significant volatility, with monthly returns swinging wildly: +6.1% in May, -0.7% in April, -5.7% in March, -1.4% in February, and +2.7% in January. For the 12 months ending June 2025, the US S&P 500 was up an impressive 13.6%. Compare this to the 8.3% 12 month return from the NZX 50, and it feels like a relatively underwhelming result by comparison.

On the policy front, President Trump continues to pressure the US Federal Reserve (the "Fed") to cut interest rates. In a handwritten note to Fed Chair Jerome Powell, Trump urged the committee to lower rates “by a lot,” claiming their delays are hurting American households. While Trump has called for rates of 1% or lower, the Fed has signalled such moves would typically be reserved for emergency situations - and would likely have far reaching unintended consequences.

Moving on to the bond market, despite ongoing global uncertainty US Treasury bonds posted their best monthly return since February. Global bonds (hedged to NZ dollars) rose 0.8% in June, while New Zealand government bonds were up 0.7%. It's unusual for both equities and bonds to deliver positive returns in the same month, but these are of course far from normal times.

Closer to home, markets were pricing in a low probability of an Official Cash Rate (OCR) cut by the Reserve Bank of New Zealand (RBNZ) in July, with the next reduction more likely between August and November. Recent economic data has given the RBNZ room to reassess and adjust policy as needed.

Over in Australia, a rate cut is expected at the next Reserve Bank of Australia (RBA) meeting, with forecasts of up to four cuts predicted in the current easing cycle. With Australia’s cash rate sitting 60 basis points above New Zealand’s (3.85% vs 3.25%), a few reductions would simply bring the two economies more closely into alignment.

So what's next for markets, interest rates and our economy? Only time will tell, as predicting these things is most often a fool's game. You can tune into Chief Economist Shamubeel Eaqub's latest State of the Nation economic update over on our podcast - links below:

Spotify podcast

Apple podcast

YouTube (full video)

As always, taking a long-term perspective when it comes to your investments is important in the face of ongoing volatility and uncertainty. This kind of approach can help us resist the urge to react to short-term ups and downs - knowing time in the market usually trumps timing the market. Your future self will thank you!

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