Lyfords quarterly newsletter reviews key financial market events that have impacted portfolio returns.
Each quarter we have an article on a financial issue we believe will interest our clients.
In addition we often post news updates and blogs on our web site at https://www.lyfords.co.nz/news-blog/
For clients who have transferred, or are looking at transferring their UK Pensions to New Zealand, updates relevant to this are posted at https://www.uk-pension-transfer.co.nz/qrops-news-blog/
The markets were definitely not ‘burning’ in the second quarter of 2026. Far from it. Investors in fact have plenty of reasons to be very pleased about returns over the recent few months. We draw on an analogy with fire drills.
2026.Q2 Economic Commentary – DOWNLOAD the full pdf version NOW.
Markets: calm in the face of conflict
The best time to hold a fire drill is when the building isn’t burning — and that, Lyfords argues, is exactly where investment markets found themselves in the second quarter of 2026. Despite a Middle East war, a sharp oil price spike and re-accelerating inflation, investors had plenty to celebrate. The message for genuine long-term investors: don’t panic, and never assume scary headlines will always hurt markets. News gets rapidly assimilated into prices, and forward-looking markets can be surprisingly quick to move on.
The Strait of Hormuz became the economic battleground
The Iran conflict departed from the script the US had imagined. The conventional military phase was largely over within weeks, but the war morphed into a different kind of struggle in which geography mattered more than armies. Iran’s control over the Strait of Hormuz — a chokepoint for global oil supply — kept energy markets uncertain and sent oil prices sharply higher. The result was a domino effect: inflation expectations rose, and central banks that had been signaling rate cuts quickly put those plans on ice, with some even considering increases. Global bond yields rose as investors priced in higher-for-longer interest rates.
Refer to our previous blog on the Strait of Hormuz
The paradox of share market returns
None of this sounded like good news for shares — yet share markets “decided to throw a party.” The US S&P 500 rose 15.2% over the quarter, Australasian markets gained 5–6%, and emerging markets delivered a stunning 24.1%. Returns like these torpedo the idea that forecasting is the pathway to outperformance: even someone who accurately predicted the war and the oil spike would most likely have sold out — and been wrong. Markets were instead supported by resilient corporate earnings, heavy global investment in technology, infrastructure and defence, and the fact that markets look past today’s headlines toward longer-term prospects.
The New Zealand picture
The RBNZ held the Official Cash Rate at 2.25% through April and May — the May decision came down to Governor Anna Breman’s casting vote after a 3–3 split, with the committee’s external members favouring a hike. The market priced a July increase as near-certain, and on 8 July the RBNZ duly lifted the OCR to 2.50%, with most economists now expecting 2.75–3.00% by year end. On migration, Lyfords pushes back on the “Kiwis leaving in droves” narrative: at 21 permanent leavers per 1,000 people, the current emigration rate is bang on its long-run average, and net migration remains positive by just over 24,000 people.
Lessons from 100 years of capitalism
Lyfords highlights research by Hendrik Bessembinder covering 29,754 US-listed shares from 1926 to 2025. A dollar broadly invested in the US market 100 years ago compounded by a staggering 1,500,000% — but that headline hides an uncomfortable truth. Around 60% of companies failed to beat US Treasury bills, and just 46 of nearly 30,000 listed companies created half of the US$91 trillion of total shareholder wealth. The market’s long-term success was driven by a very small number of exceptional businesses; everything else is secondary.
The implication for investors is simple: picking individual winners is a game where the odds are stacked against you. Diversification is how you guarantee exposure to the few companies that actually drive long-term returns — without needing to know who they are in advance. Don’t search for the needle. Buy the haystack.
No secret recipe
There is no secret formula to investing successfully. Risk never plays out as neatly as a projection graph suggests, and it is in the difficult moments that we learn our true risk tolerance. The most powerful advantage belongs to those who stay resilient — and fully invested — when markets move their way. One quarter’s results tell us almost nothing about the next; what matters is staying the course, because remaining invested through good times and bad is how long-term investors get rewarded for the risks they bear.
Blogs posted since our last newsletter:
Crypto investors – beware of the IRD
UK Pensions – new rules, new opportunities, new risks
A lot of time and effort goes into these Newsletters to provide up-to-date information and thought provoking articles.
2026.Q2 Economic Commentary – DOWNLOAD the full pdf version NOW.