Why Kiwi investors can't afford to ignore the world beyond our shores

Standing before a room of Auckland investors on Wednesday evening at our first Moomoo Priority event, I presented a chart that made several attendees audibly gasp. The green line tracking the New Zealand dollar's decline against the US dollar over the past two years told a story that every Kiwi investor needs to hear.

Between early 2023 and October 2024, the NZD has fallen approximately 10% against the USD. For those who diversified into US equities during this period, that currency movement alone added a significant boost to already impressive returns. Meanwhile, those who stayed exclusively in New Zealand markets missed both the currency gain and the extraordinary rally in global equities.

The numbers tell a sobering story. While the S&P/NZX 50 has delivered respectable returns, the NASDAQ-100 has surged dramatically, reaching new all-time highs this October. Add the currency tailwind, and the opportunity cost for locally-focused investors becomes stark. A Kiwi investor who allocated just half their portfolio to US equities three years ago would be sitting on returns that dwarf what they would have gained domestically.

This isn't about abandoning New Zealand investments, it's about recognising that in a country of 5 million people with a stock exchange whose entire market capitalisation is smaller than individual US tech giants, geographic concentration is a luxury we simply cannot afford.

The current market environment makes the need for diversification more urgent. As I showed our Auckland audience at the Cordis Hotel, the S&P 500's price-to-earnings ratio has climbed beyond 22 times – levels that would have been considered extreme before the 2008 financial crisis. These October 2024 readings sit well above the post-GFC average, suggesting we're in territory that demands careful navigation.

Yet here's the paradox: despite these stretched valuations, global institutional investors continue to pour money into US markets, creating self-reinforcing momentum that's difficult to ignore. The latest fund manager surveys show institutions remain overweight in US equities despite valuation concerns, with many calling US tech "crowded", yet continuing to hold positions.

What's driving this seemingly irrational exuberance? The answer lies in a fundamental shift I've witnessed over my four decades in markets. Retail investors now drive market dynamics in ways unimaginable when I started as a bookings clerk in 1984. The democratisation of investing has created a new phenomenon: the brand premium.

Companies such as Apple, Microsoft, Tesla and McDonald's consistently trade at valuations exceeding their less recognisable peers. This isn't institutional investor behaviour – fund managers pride themselves on ignoring such "cosmetic" factors. It's millions of individual investors choosing companies whose products they use and understand, fundamentally altering market dynamics.

(This retail revolution explains why Moomoo has become Australia's most downloaded trading app in 2025, surpassing established players such as CommSec. These aren't day traders chasing quick profits, they're everyday Australians and New Zealanders recognising that building wealth requires thinking beyond domestic borders – and, of course, choosing an accessible platform with low broking fees.)

Diversification is getting critical

US Federal Reserve chair Jay Powell's recent warnings about rising risks shouldn't be ignored. The interplay between growth, interest rates, and stubborn inflation creates a more complex environment than we've navigated in decades. Next week's US inflation reading could trigger sharp corrections if it surprises to the upside, potentially ending the rate-cut narrative that's supported recent gains.

But this volatility creates opportunity for prepared investors. Currency diversification becomes a natural hedge – if global markets correct and the NZD strengthens as investors seek safe havens, then New Zealanders' domestic holdings benefit. If markets continue their climb and the NZD remains weak, it will be international holdings that outperform.

The tools for this diversification are no longer the exclusive domain of wealthy investors. Platforms offering fractional shares mean you can build a globally diversified portfolio with modest sums. The barriers that once made international investing expensive and complex have crumbled.

As I told our Auckland audience, valuation measures are flashing warning signals I haven't seen in my career. But I've been stopped out more times than I've profited trying to call the top of this market. Momentum remains powerful, and sitting entirely on the sidelines, or worse, sitting entirely in one small market, isn't prudent risk management.

We can't afford not to diversify internationally. In a world where New Zealand's entire stock market could be bought with the spare change from Apple's balance sheet, geographic concentration isn't conservatism, it's speculation on a single, small economy.

The Kiwi investors who moved early into international markets aren't lucky; they're logical. They recognised that true diversification requires looking beyond our shores. For those still hesitating, the chart showing the NZD's decline should serve as a wake-up call: the cost of home bias has never been clearer.