ep 364 | The week ahead - Trump and Xi to meet against a volatile backdrop
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On Point with Craig's Investment Partners. The information provided here is general in nature and it's not financial advice. It doesn't take into account your situation, objectives, goals or risk tolerance. All investments are subject to risks and none are guaranteed. Before you make any investment decisions, we recommend you contact an investment advisor. For more information about our services or to view the Craig's Investment Partners Financial Advice Provider Disclosure Statement, please visit our website, which is craigsip.com. Welcome to On Point. I'm Mark Lister, Investment Director at Craig's Investment Partners, and I'll be talking about a range of topics including economics, portfolio strategy, investor education, and anything else that's happening out there in financial markets.
Morning team, hope you're all well. Hope you're feeling better than me actually. I'm a little bit under the weather at the moment, so excuse my voice. I'll try and smash through this as quickly as possible, then I'll go and have a sleep. Looking at share markets last week, the S&P 500 index in the US rose for a sixth week in a row. It was up another 2.3%. That came on the back of more strong earnings releases and hopes for a resolution in the Middle East. That sees the S&P 500 up 16.6% from the lows of late March, and it is 6% above its pre-conflict peak. Other markets were generally solid, a bit of a mixed bag out there, but one that is worth noting is emerging market shares. Emerging market shares continue to outperform.
They were up 6.9% last week. So the US market, the S&P 500, is up 8.1% year to date, but emerging markets are up 22%, almost 21.9% to be precise. So EM has been the place to be. The local NZX50 had its second consecutive weekly gain. It was up 1%. That came on the back of an 18% rise in Infratool, which is one of our biggest stocks. Interest rates were little changed. The New Zealand five-year swap rate finished the week just below 4%, which is pretty much where it started the week. And odds for the next OCR hike haven't changed a lot too from a week earlier. There is a Reserve Bank meeting at the end of this month, at the end of May. Right now, markets see a 30% chance of a hike. So possible, but no change seen as much more likely.
Look ahead to the next meeting, which is in July, though, and markets see a hike from the Reserve Bank as fully priced. And when you look at the whole calendar year, 2026, markets are pricing 85 basis points of tightening of increases in the OCR. So they usually move in 25 basis point increments. 25 basis points is 0.25%. So if the market's thinking 85, that means the market sees three 25 basis point hikes and a good chance or a half a chance of a fourth 25 basis point hike. So the market sees the OCR finishing this year at either 3% or maybe 3.25%. Right, looking back at some of the key releases and events, we had one big central bank meeting. This was across the Tasman. The Reserve Bank of Australia hiked its cash rate again.
That was expected, so it moved it up by 0.25%. That takes it to 4.35%. Now, the headline inflation rate obviously jumped to 4.6% in March. We talked about that a week ago. That's the highest we've seen since 2023. So that sort of forced the RBA's hand, even though it wasn't quite as high as expected. Now, that move from the RBA was the third of this year. So that sees the RBA cash rate back where it started last year. So the three cuts that we saw in 2025 have all been reversed now. And what that means is that the difference in their OCR and our OCR here in New Zealand has increased to 2.1%, 4.35 minus 2.25. That is the highest since 2011. Now, that is unusual because if you look back over the last 25 years, 70% of the time our OCR has been higher than theirs.
It's not at the moment. and they're actually way higher than us. So that goes a long way to explaining why the Kiwi dollar is sitting at about 82 cents against the Aussie dollar. That is the lowest since 2013, and it's about 7% below the long-term average of 88 cents.
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