Investment markets have remained surprisingly resilient during 2026, despite continuing geopolitical uncertainty, higher oil prices and renewed concerns about inflation and interest rates.

International share markets

The US share market continues to be supported by relatively strong corporate earnings and substantial investment in artificial intelligence, data centres and technology infrastructure. Technology and semiconductor companies have been particular beneficiaries.

However, valuations in parts of the US market are relatively high. Higher interest rates and bond yields also mean investors now have attractive alternatives to shares. This suggests that while the longer-term outlook remains positive, periods of volatility should be expected.

European markets face greater challenges from higher energy costs and relatively subdued economic growth. In Asia, Japan, South Korea and Taiwan are benefiting from technology investment and strong demand for semiconductors.

Interest rates and inflation

Inflation has again become an important issue, particularly following higher oil and energy prices. Central banks are therefore being cautious about reducing interest rates, and in some cases rates have moved higher.

The positive side of higher interest rates is that bonds and other fixed-interest investments are now providing more attractive prospective returns. This is helpful for diversified investors who do not want to rely entirely on share markets to generate returns.

New Zealand

The New Zealand economy remains relatively subdued, although there are signs of improvement. Inflation has increased again, influenced significantly by higher fuel prices, and the Reserve Bank increased the Official Cash Rate to 2.75% in September.

Export industries remain relatively strong, but household spending, employment and the housing market are softer. For NZ investors, this reinforces the importance of having investments diversified internationally rather than relying predominantly on the relatively small New Zealand market.

What does this mean for investors?

The medium- to long-term outlook remains reasonably constructive, but we should expect investment markets to experience periods of volatility.

For investors building wealth for retirement—or drawing an income during retirement—the key remains diversification and maintaining an appropriate exposure to growth assets.

Rather than trying to predict the next market movement, a well-structured portfolio can spread investments across international and New Zealand shares, fixed interest, infrastructure and other assets.

After several years in which US technology shares have produced exceptional returns, this diversification is particularly important. The next few years may see investment returns coming from a broader range of markets and asset classes.

For long-term investors, periods of market uncertainty are a normal part of investing and should generally be considered within the context of their overall financial strategy rather than in isolation.