Fund watch

Market outlook

In March, US equities drifted off all-time highs, largely driven by ongoing uncertainty around US trade policies and President Trump’s on-again, off-again approach to tariff announcements. Meanwhile, this policy uncertainty started to show up in consumer sentiment reports, which mostly came in on the softer side.

As we assess the outlook for the global economy, these are the key areas we’re keeping a watchful eye on.

Tariffs remain the focus: President Trump’s trade policies have driven market direction over the past several weeks, with tariff announcements putting downward pressure on equity markets, while his announcements of delays or changes have only added to volatility.

Against this backdrop of policy uncertainty, equity market direction in the short term will be driven in part by further policy announcements – positive or negative.

US equity market valuations: Despite the recent sell-off in US equities, valuations remain stretched. Trailing and forward price-to-earnings (P/E) ratios remain around 20x, which suggests meaningful upside to US equities could be limited.

Bond market outlook: Bonds remain in a relatively tight range, with the US 10-year government bond yield spending most of March in and around the 4.25% level. On the one hand, yields have moved higher on tariff risks and fears of inflation reacceleration, while on the other hand, the possibility of slower US growth has put downward pressure on bond yields.

We currently see potential in lower US yields as a positioning opportunity over the short to medium term, given signs of slowing US growth and the Fed’s willingness to cut interest rates further if inflation decelerates or economic data weakens. Moreover, support for US bonds comes from the administration’s policy alignment, as they prioritise a lower 10-year Treasury yield as a key indicator of economic success.

This article has been prepared by ANZ New Zealand Investments Limited (‘ANZ Investments’) for information purposes only and it should not be treated as financial advice.

Superannuation Investments Limited is the issuer and manager of the SIL Mutual Scheme. ANZ Investments is the investment and administration manager. ANZ Investments is not an authorised deposit taking institution (ADI) under Australian law and investments in the scheme aren't deposits in or liabilities of ANZ Bank New Zealand Limited, Australia and New Zealand Banking Group Limited, or their subsidiaries (together 'ANZ Group'). ANZ Group doesn’t stand behind or guarantee ANZ Investments. Investments in the scheme are subject to investment risk, including possible delays in repayment, and loss of income and principal invested. ANZ Group won’t be liable to you for the capital value or performance of your investment.

Past performance does not indicate future performance, and performance can be negative as well as positive. This material is for information purposes only. We recommend seeking financial advice about your situation and goals before getting a financial product.

Investment and administration manager: ANZ New Zealand Investments Limited.