Market commentary: May-Jun 2025

Investment performance

Client portfolio returns for the full year are strong despite ordinary returns over the last 6 months. This is pleasing given the uncertain market environment. International shares continue to be the standout performer with returns around the 10% mark. Prices are elevated and investor sentiment remains optimistic. Accordingly, we’ve trimmed investment in shares and are poised to trim again when sentiment data turns pessimistic.

3 Megatrends that will define the next decade

Megatrends are long lasting trends that change the way we live. An example is the arrival of the iPhone in 2007 that revolutionised social connection and commerce. Imagine if you’d bought Apple shares for around $5 back then!

Here are three megatrends that are shaping our world today and companies that are set to benefit..

Health spending

People are living longer thanks to ongoing medical advances. Older people spend 3 times as much on health as younger people. Obesity due to sedentary lifestyle is leading to increased health spending. This megatrend presents long term growth opportunities in the areas of drug development and surgical procedures.

Novo Nordisk is a Danish pharmaceutical company that makes medications and devices for diabetes care. Stryker is a US company known for innovation of hip and knee replacement parts and robotic surgery. Both companies have the advantage of decades of intellectual property and being first movers in this area.

Semiconductors

Semiconductors are like the ‘new oil’ to the point they are powering other megatrends like artificial intelligence and robotics. They are the ‘brains’ that perform tasks that enable our modern society to function. Telecommunications, banking, healthcare, manufacturing, and transport all rely heavily on semiconductors.

Two companies stand out as quality investments in this area. TSMC (Taiwan Semi-conductor Manufacturing Company) manufactures the most advanced semiconductors in the world and supplies tech companies like Google and Amazon. Dutch company ASML is the global monopoly provider of the machines and tools needed to make semiconductors. TSMC is their largest client.

Digital innovation in the financial sector

Surprisingly countries like Germany and Spain are 10 years behind in digitalisation of cash. Plenty to go yet in this megatrend. Banks and financial institutions are using AI to perform tasks like loan approvals and applications for insurance cover.

Great examples are Visa and MasterCard who are innovators and have vast global networks (consumers, merchants and banks) making it incredibly hard to break into this market.

Bringing it together

The goal is to fully understand a megatrend and select quality companies that can grow faster than peers. Investors who achieve this gain the advantages of holding a long term investment and the compounding power of above market returns.

Richard Grimes, CERTIFIED FINANCIAL PLANNER (CFP^CM), Director and Financial Adviser