April Wrap Up: Who would have predicted that?

The Strait of Hormuz closed. A US blockade in place. Oil prices above US$100 per barrel. The US share market back at all-time highs. In the immortal words of Sesame Street (some of you might need to look that one up!), one of these things is not like the other. There could not be a more powerful reminder that market prices are not set by headlines and that they can be unpredictable. Navigating this environment is not easy, but by focusing on fundamentals and the mega forces driving the global economy, our portfolios have comfortably beaten market benchmarks over the quarter and placed the majority of the ASB Investment Funds and ASB KiwiSaver Scheme funds at  the top of performance surveys, such as those published by Melville Jessup Weaver (MJW) and Morningstar, over the past year.

Wow and why?

The Financial Times calls it “the paradox of 2026.”  We all know the bad news. War in Iran. Soaring energy prices and possible shortages, not only of oil, but of other systemically important industrial commodities. Conflict in Ukraine and Sudan. Geopolitical volatility. Unsurprisingly consumer confidence around the world is in a hole. These are challenging times.

Despite this, the US share market, as measured by the S&P 500 index, ended April at a record high of 7,209, breaking the 7,200 level for the first time. It was a strong month. The S&P 500 was up more than 10% in April, its best monthly performance since 2020. While the US share market has been the standout, European shares and markets in the Asia Pacific region have been surprisingly resilient. As the FT notes, “the Euro Stoxx, say, is lower than in late February but still 13 per cent up on the year.”

There appears to be a very real disconnect between financial markets, headlines, and the on-the-ground reality of a global energy crisis. What’s going on?

We think the explanation lies in two, somewhat interrelated, areas.

First has been the reignition of the AI trade and the performance of technology stocks around the world. The building blocks of AI infrastructure were particularly strong. This included massive rallies in semiconductor shares like Intel, Micron and AMD alongside strength in storage manufacturers like SanDisk and Seagate. With one commentator suggesting up to 42% of total S&P 500 market value is AI related, strong performance in this space drives strong performance overall for US shares. This is not just a US phenomenon. AI strength also led to a massive rally in the emerging markets where companies like TSMC and Samsung are index heavyweights.

The second explanation is strong company earnings. Earnings and earnings growth is the primary long-term driver of share prices. Higher earnings eventually equal higher share prices.  

The numbers are very good. By the end of April, around 63% of S&P 500 companies had reported earnings outcomes for the first quarter. The blended year-over-year earnings growth rate for these companies is a staggering 27.1%, the highest since Q4 2021. Overall, 84% of companies beat earnings expected by analysts, while 81% reported a positive revenue surprise, both figures significantly higher than long-term averages. 

Time will tell if the AI mega force and the earnings growth it is helping drive will outlast the challenges the Iran conflict raises, but for now the fundamentals and market momentum are tipping in its favour.  

What’s happening in your portfolio?

Last month we talked about the importance of having a clear investment process to guide thinking during periods of market volatility.  BlackRock’s long-term mega trends are an important way we anchor our thinking. In our view these will persist over time and can guide how we invest even in the most challenging environments.

While our process relies on more than just mega trends this approach did inform portfolio construction coming into 2026. Specifically, we were cautious about geopolitical risk and included a small allocation to gold in portfolios. Geopolitical risk is typically inflationary and so we wanted to avoid investing in long-term bonds preferring shorter maturity bonds and corporate exposure. We were cautious about overall share market valuations, so we diversified our portfolio including an allocation to infrastructure shares and emerging markets. Finally, we included inflation indexed bonds, a good hedge against inflation risk.

While not all of these positions paid off over the past few months the good news is that on average, they did. That has resulted in strong relative returns for ASB portfolios, comfortably beating market benchmarks. 

While we don’t focus on what other investment managers are doing, instead focussing on perfecting our own approach, it is pleasing that ASB portfolios have performed well versus competitors. The recent MJW survey* of KiwiSaver performance up to 31 March 2026, highlights this. The ASB KiwiSaver Scheme Growth Fund ranks second out of 15 managers over the past year, and second out of 14 over ten years. Our Balanced Fund is first over the year against 17 other funds and second out of 14 over ten years. And finally, our Conservative Fund is first in the pack over one and three-year periods. We are proud of the track record we are building.