Insights
Market Review for March 2025

Thanks to President Trump’s brutal trade tariffs we are in the early innings of a trade war leading to market volatility, weakening confidence, and fears that inflation might get a second wind.

The painful truth is that no one can say he didn’t warn us. Trump was vocal on the campaign trail about this love of tariffs, and current events are a repeat, albeit a turbo-charged version, of his first stint in power. The biggest short-term challenge for investors is the sheer amount of uncertainty and disruption that has been unleashed at breakneck speed.

There are any number of conflicting schools of thought about where this trade war is ultimately heading. Some commentators see it as a ‘shock-and-awe’ approach to renegotiate better trade deals, very much in the spirit of the ‘American first’ campaign slogan. Meanwhile, the most pessimistic observers write it off as blunt ideology rather than savvy strategy.

Opinions aside, the core challenge is that uncertainty - the biggest tariff spillover - is a handbrake on an economy. In a short space of time, we’ve seen a flip from economic confidence to economic nervousness, which will impact Corporate America - a major cog in the global growth engine - for an unknown amount of time. Amongst other things, firms will likely pause plans to hire and expand, until they have more clarity about the direction of travel.

While the global economy can handle 10% tariffs, the bigger question is the end game, particularly regarding the two duelling economic powerhouses. Given the interconnectivity of economies and trade routes around the world, there can be few winners if China and the US keep landing huge tariff haymakers on one another.

Central banks in key economies now find themselves gearing up to tackle a different inflationary outlook to the one at the start of the year. Depending on how things evolve, we may start to hear more talk of ‘stagflation’, should sluggish growth and stubborn inflation embed themselves.

Unlike during the COVID-19 pandemic, which was an exogenous shock to which governments and central banks responded with plenty of stimulus, the difference today is that this is policy-induced pain. Just as it was created, it can also be undone.

Amid the chaos, staying the course of ethical investing in order to help build a brighter global future, is arguably more vital than ever.

There is no sugar-coating what we are seeing playing out here in the short term. The violent re-configuration of trade terms has winded the global economy, and spooked global markets.

So far, equity investors across the world have been on a rollercoaster ride with US markets alone recording a loss of over $6trillion in 2 days at one stage, followed by a notably sharp bounce of the news of a pause in April.

Bond markets also weren’t immune to the drama, with higher interest rates in the US in particular, tarnishing its reputation as a safe-haven asset in volatile times.

In parallel with the chaos overseas, there was better news at home thanks to the March release of New Zealand’s Q4 2024 GDP data. The 0.7% uptick represented a technical end to a painful recession that started in 2022.

Inevitably, such a small rebound sparked a debate about whether the change in fortunes could be sustained. If global trade friction takes a toll, and the jobs market continues to worsen, then the Reserve Bank of New Zealand may be forced to cut rates again to stimulate the economy.

Founded in 1934 as part of Fisher & Paykel Industries, the company became a standalone entity in 2001 to focus on its core healthcare competencies. Today, it’s the largest business on the New Zealand stock market with a market valuation of approximately $20 billion.

Fisher & Paykel has over 7,000 employees and markets its products in over 120 countries, with manufacturing operations in New Zealand and Mexico. The business has a long track record of developing products that have real-world healthcare impacts, earning IP protection, and increasingly becoming embedded in the clinical standard of care. It currently reinvests a healthy average of 14% of its last five years of revenue back into research and development for the next phases of growth.

Pathfinder granted Fisher & Paykel Healthcare an exception to our animal testing exclusions because we deemed it critical to the construction of our portfolio. We’ve engaged with them directly and are satisfied this practice is used only when required by law and they support the reduction of animal testing through funding research into alternatives such as physiological computer modelling. You can read more about how our exceptions work in relation to animal testing here.

Whilst likely exposed to US tariffs, its long-term focus along with quality management, modest use of pricing and cost levers to mitigate headwinds, coupled with the impact mostly reflected in the share price already, give us comfort.

We currently retain an exposure to the company in all Pathfinder KiwiSaver funds, the Ethical Growth Fund and Ethical Trans-Tasman Fund ranging from 1% to 6% depending on the fund.

Whichever way you cut it, and regardless of personal opinions, the recent global fallout jars with Pathfinder’s commitment for our investing to help fund a transition to a better world. One that champions respect for people, our planet and animals.

For investors, the crucial thing is to focus on long-term strategy, and not short-term newsflow. Why? Because long-term asset allocation is broadly recognised as where the real value lies when it comes to returns.

We understand it can be stressful watching your saving fluctuate under the market conditions. Our customer service team are happy to assist you with any questions you have about your investment. In the meantime, please be assured that our investment team is working at their best, actively managing your savings. We will keep monitoring events and action accordingly for you.

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Pathfinder recommend all investors receive financial advice before making an investment decision. Pathfinder Asset Management Limited is the issuer of the Pathfinder KiwiSaver Plan and Pathfinder Investment Funds. Product Disclosure Statements for the offers are available at pathfinder.kiwi. Learn more about how we invest ethically by reading our Ethical Investment Policy here.