The reporting season has produced a better than expected set of results from many companies, yet the NZX50 index has continued to slide.
The index is hovering around correction territory - classified as a 10 per cent fall - while other markets around the world remain strong.
Stephen Bennie, of Castle Point Funds, said there were two parts to the story when it came to the index fall.
One part is stock-specific declines, while the other is the overall theme of inflation, making New Zealand's dividend yield-heavy market appear much less attractive to overseas investors.
Bennie said about 2.5 percentage points of the index fall was attributable to the energy companies - Meridian, Contact, Mercury and Genesis - which make up a large part of the index.
"Meridian is down 20 per cent, Contact 14 per cent and Mercury and Genesis both 10 per cent. That is a lot for the index to cope with."
The reason for the falls was that global clean energy exchange traded funds, which had been strong buyers of Mercury and Contact shares in the last month, have more recently been selling.
Outside of the energy companies, Fisher & Paykel Healthcare has also weighed the index down. After a strong run last year, buoyed by huge demand for its products through the Covid outbreak, the stock has fallen of late as vaccine rollouts point to what is hopefully the beginning of the end for the pandemic.
Bennie said Auckland International Airport's result last week had also put a downer on the index.
"Reporting season has been pretty good for most companies, apart from the tourism companies."
Investors have been disappointed by the fact that a transtasman bubble no longer seems likely to happen in the first half of this year.
The second major issue hanging over the New Zealand sharemarket is the expectation of rising inflation, thanks to the huge amount of stimulus that has been pumped into economies around the world.
Last year low interest rates saw overseas investors pile into New Zealand companies which pay high dividends.
Bennie said overseas investors typically owned about 25 to 35 per cent of New Zealand shares but that had risen to more than 50 per cent.
But now there are experts pointing to inflation ahead, New Zealand's dividend-paying shares are looking comparatively less attractive.
"The market is having a bit of a pivot."
Bennie said that meant the New Zealand market's tailwind had effectively gone, leaving it becalmed.
"We have been left a bit high and dry."
Whether the slump will continue is not easily predicted. Bennie said there had been similar scenarios before over the past 30 years, where economists predicted high inflation but it had never eventuated.
"But there is certainly renewed expectation."
Sam Dickie, New Zealand equities manager at Fisher Funds, said the market was super focused on nascent inflation.
"The market is pricing in inflation expectations for the next five years at the highest level since 2013. Five minutes ago it feels like we were in a deflationary recession and now we are pricing inflation at the highest in eight years."
He said the rise in interest rates "means our market is underperforming sharply".
Dickie said that meant Fisher Funds was looking for companies with pricing power - the ability to lift prices in line with or more than inflation, to maintain or improve their margins.
He said Xero was a good example of that.
"If you look at the last three or four years globally, they have increased their prices by around three times as much as local inflation."
Another one was Vista Group, which had CPI increases built into many of its contracts.
"It is those sort of companies we are looking for in this environment."
He said staying away from the dividend-heavy New Zealand market was also a way to protect against inflation.
Genesis Energy chief executive Marc England says the electricity generators are facing a challenging energy crunch this year.
"We have got a shortage of water in the lakes; we are in the lower quartile for hydro levels this time of year based on historical averages. It is particularly dry in the South Island. We have got a declining gas infrastructure, declining production from fields across New Zealand and so we are facing into that and have high wholesale prices as a result."
But he says it is times like this where Genesis steps up with the Huntly power station to help fill the gap.
"But we are keeping a watchful eye on it. I think things are looking drier than what we would like for the sector and that brings with it a number of risks and opportunities and we will manage through them as best we can."
Climate change means New Zealand is likely to continue having drier summers, so Huntly may have to be called on to fill the gap, but running the station goes counter to Government plans to make New Zealand carbon neutral.
Genesis is working on alternatives to the coal-fired station. Its Waipipi wind farm in south Taranaki will be up to full capacity next month and a second phase will bring a further 1,350GWh of renewable electricity to the market by 2024.
England said it was really positive that there was enough potential in New Zealand to supply more renewable power into the system.
"But we are also arguing, we will get up to about 93, 95 per cent renewable in the next few years in New Zealand but we don't really have a solution for that dry year risk and it provides that back-up.
"So we believe as probably the lowest cost, and most economically simple way to ensure a reliable stable electricity system, and enable other sectors to decarbonise with electricity, which ultimately is New Zealand's biggest opportunity in the near term. We are going to keep making that case."
In the meantime, England says Genesis has signed up to removing at least 1.2 million tonnes of annual carbon emissions over the next five years as part of its commitment to the Science Based Targets initiative (SBTi) international benchmark of limiting global warming to below 1.5C by 2025.