“In times of turbulence and change, it is more true than ever that knowledge is power.” – John F. Kennedy

Australian Market

The Australian equity market delivered a strong result in May, with the S&P/ASX 200 Accumulation Index rising 4.2%, marking a reversal from the volatility seen earlier in the year.

In our opinion, this was not solely a relief rally, it was underpinned by tangible macro and micro-economic developments that helped reignite risk appetite.

The Reserve Bank of Australia (RBA) delivered its second 25bps cut for the year, lowering the cash rate to 3.85% and acknowledging that a 50bps move was discussed. This marked a shift toward policy acceleration, with the RBA responding to signs of demand weakness (notably a surprise fall in April retail sales) despite persistent strength in employment figures.

Investor sentiment was further supported by a clear outcome in the federal election, with the Labor government returning with a majority. This removed policy uncertainty and allowed investors to begin pricing in the fiscal impact of its campaign commitments, most notably the Housing Australia Future Fund and broader infrastructure plans.

Equity markets responded strongly, especially in the more interest rate-sensitive corners of the market:

Tech stocks surged nearly 20%, led by companies like Wisetech, which benefited from M&A activity and upgrades to global logistics demand.

REITs and discretionary retailers also gained, as lower bond yields and consumer optimism (buoyed by anticipated mortgage relief) lifted valuation multiples.

Gold remained a standout theme. Prices breached US$3,000/oz amid ongoing global volatility and rising central bank purchases. Australian gold miners like De Grey, and Pantoro outperformed, buoyed by the rising commodity price and local M&A activity.

However, not all sectors participated in the equity rally. Energy lagged, with oil prices falling below US$60/bbl after OPEC+ raised output guidance. Some Materials names were also hit by concerns over slowing Chinese industrial demand and global supply chain congestion.

Importantly, smaller companies outperformed large caps. The ASX Small Ords rose 5.76%, and the ASX 300 ex-20 gained 5.58%, compared to a 3.2% gain in the ASX 50 benchmark. This reflects a broader rotation into domestic cyclicals and quality growth businesses outside the ASX50.

Global Markets

Global equity markets saw a return of risk-on momentum in May, with the MSCI AC World Index (AUD) advancing 5.1%, despite policy and geopolitical uncertainty remaining high (in our opinion, when compared to Australia).

A key macro driver was the ongoing volatility around U.S. trade policy. The Trump administration’s “Liberation Day” tariffs, which introduced sweeping levies of up to 145% on Chinese imports and 10–30% on other key partners were challenged in court and briefly blocked.

However, they were reinstated on appeal, only to be paused mid-month amid diplomatic negotiations. These developments caused substantial intraday volatility and forced investors to adjust pricing for inflation expectations, global logistics costs, and multinational earnings exposure.

U.S. equities managed to rally through the month, led by large-cap Technology and Communication Services stocks. Microsoft was emblematic of this, posting a robust beat on Azure and AI-related cloud infrastructure growth. Meanwhile, Consumer Discretionary and Financials showed mixed results, as companies began flagging margin compression due to input cost volatility and tariff-related disruptions.

In Europe, markets held steady, helped by signals from the European Central Bank that a rate cut could be delivered as soon as June. This supported Financials and Industrials, although autos and luxury goods underperformed due to euro strength and declining Asian demand.

China surprised on the upside, with policymakers announcing a new round of targeted stimulus, particularly for the property and tech sectors. Equity markets initially rose on the news but gave up some gains late in the month as economic data remained patchy.

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“The greatest danger in times of turbulence is not the turbulence, it is to act with yesterday’s logic.” – Peter Drucker

Australian Market

April witnessed a remarkable rebound in Australian equities, with the S&P/ASX 200 Accumulation Index rising 3.6%. This performance was particularly notable given the significant intra-month volatility, where the index initially dropped 6.5% before rallying nearly 10% from its monthly low. This sharp turnaround was driven by investor optimism following reports of a temporary pause in the U.S. tariff escalation, which had initially spooked global markets.

Several factors contributed to Australia’s resilience.

• Domestic Economic Strength: Australia’s economy continues its robustness, underpinned by reasonably strong consumer spending and (now) a stable political environment. The recent re-election of the centre-left government with an expanded majority has provided policy continuity, further bolstering investor confidence.
• Attractive Valuations: Compared to global peers, we believe Australian equities are trading at relatively attractive valuations. The S&P/ASX 200’s projected Price Earnings (PE) ratio stands at 16.4 times, with an indicated dividend yield of 3.8%, making it appealing for investors seeking capital appreciation or yield.
• Currency Advantage: The Australian dollar remains near the bottom of its 20-year range, enhancing the competitiveness of Australian exports and making local assets more attractive to foreign investors.

Sector-wise, performance was mixed:

• Technology, Media & Telecom (TMT): These sectors led the months’ rally, supported by falling bond yields and a pivot back to structural growth stories.
• Gold Miners: Continued their ascent as spot prices surged past US$3,000/oz, reflecting ongoing investor demand for safe-haven assets.
• Energy and Materials: Lagged due to a 18% fall in oil prices, following increased OPEC supply quotas and concerns over global demand.

Notably, international investors have been increasing their exposure to Australian equities. Macquarie revealed that offshore investors purchased A$800 million in bank stocks in Q1 2025, with buying momentum continuing into April. This trend underscores Australia’s appeal as a relatively insulated market amid global trade tensions.

Global Markets

Global equities faced headwinds in April, with the MSCI AC World Index (AUD) declining by 1.7%. The primary catalyst was the U.S. administration’s “Liberation Day” tariffs announced on April 2, which imposed tariffs of up to 145% on Chinese imports and 10–30% on other major trading partners. This abrupt policy shift triggered significant market volatility.

Key developments included:

• U.S. Market Volatility: The S&P 500 experienced a sharp 12% drop in early April, followed by a 9.5% rebound after the administration paused reciprocal tariffs. Despite the recovery, the index remains down year-to-date, reflecting investor caution.
• European Stability: European markets showed relative resilience, with the STOXX 600 declining modestly. Export-focused sectors like autos and luxury goods faced pressure due to the strong euro and reduced U.S. demand.
• China’s Modest Rebound: China’s equity market posted a 1.3% gain mid-month, buoyed by policy support and investor optimism. However, gains were later tempered by renewed concerns over export demand.
• Gold’s Surge: Gold prices continued their upward trajectory, driven by geopolitical risks and investor risk aversion. Gold stocks remained standout performers across regions.

The global investment landscape is increasingly characterised by:

• Trade Policy Uncertainty: The unpredictability of U.S. trade policy has introduced significant uncertainty, prompting investors to reassess risk exposures.
• Central Bank Dilemmas: Central banks are grappling with the dual challenges of rising inflation from tariffs and slowing growth from trade disruptions, complicating monetary policy decisions.
• Shift to Quality: In this environment, we believe that investors are, and will continue, to gravitate towards companies with resilient earnings, strong balance sheets, and pricing power.

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“The investor’s chief problem, and even his worst enemy, is likely to be himself.” – Benjamin Graham

This month we published an article titled: “Why We Freeze: How to Profit in Times of Fear”.  The article explores how market corrections, like the recent ASX and S&P 500 declines, can trigger investor paralysis driven by behavioural biases such as loss aversion and herd mentality. It argues that these moments of fear often present rare (yet possibly uncomfortable), attractive buying opportunities – if investors can act with discipline and conviction.

Please read or listen at the following link: www.blackwattlepartners.com/how-to-profit-from-the-market-panic/

Australian Market

Australian equities faced continued headwinds in March, with the S&P/ASX 200 Total Return Index declining by 3.4%, marking the second consecutive month of losses. Investor sentiment was dampened by a combination of global trade tensions, domestic economic softness, and cautious central bank rhetoric.​

Monetary Policy: The Reserve Bank of Australia (RBA) maintained the cash rate at 4.1% in April, following a 25bps cut in February.

Sector Performance: The market exhibited a bifurcated performance:​

• Earnings season volatility persisted, with the market penalising companies that missed expectations.
• Technology stocks were particularly vulnerable, declining close to 10%, while Consumer Discretionary stocks fell by 6.3%.
• Small Resources rose by 4.6%, driven by a surging gold price amid geopolitical tensions and tariff risks.​ Small Industrials fell by 6.7%, with Technology, Financials, and Consumer stocks underperforming.​

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