Insights
Market review for July 2025

This month:

A mid-year snapshot: recovery amid global volatility

Global events & ethical investing: war, climate & responsibility

Portfolio moves: strategic trades & future positioning

As we find ourselves halfway through the year, our latest market update offers a good chance for reflection, as well as contemplation of what might lie ahead.

So far in 2025, unpredictability and volatility have been a hard-to-watch double-act on the global stage. Meanwhile, warfare - a topic we address later in the article - has left an indelible mark. America bombing Iran, in support of Israel’s preemptive attack, was the biggest news story of last month, if not the year.

On a more positive note, we continue to seek attractive fund holdings amid the global chaos, and you’ll find our latest trading update below.

All of our KiwiSaver funds, and five out of six of our Managed Funds, posted positive absolute returns in June and are higher year-to-date. Recent conditions have weighed on short-term performance relative to broader investment strategies that invest in sectors such as defense, but as always with investing we urge patience and a long-term focus.

By the end of June, US stocks were once again in robust health, propelled by the AI growth story. Retail investors seeking to ‘buy the dip’ provided further support.

From a valuation perspective, US stocks look increasingly expensive [1] compared to geographical peers, though European stocks have marginally outperformed them in the first half of the year. Nevertheless, the ongoing popularity of US-listed companies is striking, and they have weathered the tariff storm relatively well, for now.

The same cannot be said for the US dollar. The end of June marked the currency’s worst performance in the first half of a year since 1973. Spooked by the trade war, investors have been looking elsewhere for portfolio protection, with German government debt and gold being two of the recent beneficiaries. (See our May update for thoughts on the global appetite for gold).

Closer to home, last month saw contrasting Trans-Tasman fortunes. Investors in Australian stocks were again able to ride the wave of encouraging inflation data, supportive conditions for future interest rate cuts, and a strong jobs market. The S&P/ASX200 ended the first 6 months of the year up 4.7%. Unfortunately, the New Zealand investor landscape came up comparatively short. By the end of June, the S&P/NZ 50 index was up 1.5% for the month, but down -3.6% year-to-date.

At the time of writing this market update, Europe’s sweltering with record-breaking heat that makes an even bigger mockery of climate change denial. Likewise, there were fatal flash-floods in Pakistan in June (and in the US in July) - an increasingly common occurrence thanks to global warming.

Meanwhile, bombs continue to scorch the earth and ruin lives in war zones around the world, including in the Middle East where threats to oil supply risk destabilising the global economy.

Unfortunately, war creates many layers of devastation at both social and environmental levels. Recent research claimed that the carbon footprint of the Israel-Hamas war was bigger (in the first 15 months) than that of 100 individual countries [1].

All of which brings us to these points, which you’ll hopefully find reassuring:

At Pathfinder, we aim to avoid investing in companies deriving more than 5% revenue from the exploration and/or extraction of fossil fuels due to their negative role in today’s climate emergency. We currently grant one exception to this rule: for Contact Energy due to their commitment to renewable energy production and phasing out of reliance on coal-fired power from Huntly. Read more about our Exceptions here.

Similarly, we aim to avoid investing in companies intentionally profiting from war.
We seek to exclude companies that derive more than 5% revenue from components of weapon systems, support systems, and services related to the weapon. In recognition of this, all our eligible funds are certified Weapons Free by Mindful Money, learn more about their methodology here.

But to fend off digital attacks, we do invest in cyber security tools as we see the societal benefits of enabling robust defence against a rising global menace. At the time of writing, we are invested in two firms in this space - Palo Alto Network and Fortinet.

Having spotted some good opportunities to buy and sell, our team made the following tactical trades last month:

We invested in:

Republic Services, the second-largest provider of non-hazardous solid waste collection, transfer, recycling, and disposal services in America. Roughly 75% of its revenue is tied to recurring collection services. An ESG leader, with stable cash flows and pricing power, the company is investing in renewable gas from landfills and Polymer recycling centres.

HealthEquity, a high-quality, recurring-revenue business at the intersection of healthcare and financial services. As the largest Health Savings Account custodian in the US, with approximately 25% market share, the company helps 14 million customers maximise the impact of each dollar with tax-efficient savings accounts. While the American healthcare system has plenty of moral flaws, this company is improving affordability by providing a 'High Deductible Health Plan' that costs 28% lower than a traditional plan offering.

Elia Group is an energy transmission company working to expand international connections to its high-voltage electric grid, supporting the transition to renewable energy. The company operates under a regulatory framework that is 25% Belgian and 75% German. Recently, Elia raised equity to help fund a major multi-year grid expansion program, in anticipation of increased renewable power generation and a declining reliance on natural gas.

We exited:

Vital Healthcare is a Real Estate Fund Manager (investing in healthcare related real estate). We sold our holding due to an assessment that their valuation had weakened and concerns over high fees and governance.

The first six months of 2025 have tested investor nerves. It is impossible to predict what the next 6 months of the year will bring. However, if trade tensions cool, if inflation remains under control, and if diplomacy replaces weaponry, then the short-term prospects for investors will hopefully look rosier.

Thanks as always for reading our market update, and for choosing to invest with people, our planet and animals in mind.

The Pathfinder Team

[1] The Guardian, ‘Carbon footprint of Israel’s war on Gaza exceeds that of many entire countries’, 30 May 2025

Mindful Money weapons free: https://mindfulmoney.nz/get-involved/weapons-free/

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Pathfinder Asset Management Limited is the issuer of the Pathfinder KiwiSaver Plan and Pathfinder Investment Funds.  Product Disclosure Statements for these offers are available at pathfinder.kiwi. Learn more about how we invest ethically by reading our Ethical Investment Policy & Exceptions Register on our website.