“Discipline is the bridge between goals and accomplishment.” – Jim Rohn

Market Insights

Australian Market

The S&P/ASX200 Accumulation Index rose 3.1% in August, marking another strong month for Australian equities. Markets were buoyed by a third RBA cash rate cut this year, bringing the rate to 3.60%, and supported by global signals from Jackson Hole that U.S. policy easing is likely in September.

The August reporting season provided a wealth of insight into corporate resilience.

Consumer optimism surprised to the upside: retailers exposed to household goods reported accelerating sales growth of 4-8% in early August, particularly in hardware, electrical, and furniture. This momentum reflected the compounding effect of two RBA cuts (in February and May), robust wages growth, and ongoing house price appreciation. Despite higher household debt, in our opinion these factors underpinned spending, showing the Australian consumer is resilient.

Banking sector results reinforced this resilience. CBA reported lower impairment charges, while NAB flagged stabilisation in arrears, suggesting stress levels are moderating. Regulatory reforms post-GFC and a more supportive approach to arrears management have also softened the impact of higher borrowing costs.

Sector performance was diverse:

• Materials (+9.0%) and Energy (+1.6%) rallied as Chinese policy support lifted commodity demand. Importantly, China announced large-scale infrastructure initiatives and began tackling industrial overcapacity in steel, aluminium, and solar, improving outlooks for exporters.
• Healthcare (-13.3%) was hit hard led by CSL (-21.4%) after delaying gross margin recovery expectations. Globally, healthcare budgets and reimbursement rates are failing to keep pace with inflation and rising operating costs.
• Consumer Discretionary outperformed as rate-sensitive names rallied on stronger spending signals.

Reporting season was notable for its volatility: average share price moves on result day reached ±8.3%, on our assessment, the most volatile season on record. We believe that algorithmic and systematic trading amplified these swings, leading to dislocations between earnings revisions and share price reactions. For long-term investors, such volatility provides opportunities to differentiate between short-term distortions and genuine shifts in company value.

Global Markets

Global equities advanced again in August, but leadership narrowed, and dispersion increased across regions and styles. The MSCI ACWI (AUD, Net Return) rose +0.8%, extending a four-month winning streak.

Materials (+5.3%) led on firmer commodity prices and improving industrial demand signals, while Healthcare (+3.1%) and Communication Services (+2.5%) also contributed; Consumer Staples (-1.1%) and Real Estate (-0.8%) lagged as risk appetite remained firm.

US equities closed at fresh highs, yet the rally’s breadth was less even than earlier in the year, with growth- and cyclical-exposed segments continuing to carry most of the load.

• United States. The S&P 500 and Nasdaq posted a fifth straight monthly gain, supported by an earnings season in which over 75% of companies beat expectations. Core inflation cooled modestly, while headline was nudged up by firmer energy; the Fed stayed in wait-and-see mode ahead of September.
• Europe. Major indices (Euro Stoxx 50, DAX) ground higher despite softer hard data. Manufacturing stayed weak, but services stabilised and inflation continued to moderate, allowing the ECB to reinforce a cautious easing path (further cuts contingent on sustained disinflation). Earnings were broadly supportive overall; industrials and luxury outperformed, while banks came under pressure as investors reassessed profitability in a lower-rate environment.
• Asia. Performance was mixed. China struggled to maintain July’s momentum as weaker property data and ongoing geopolitical tension weighed on consumer and financials, even as policy support and tech earnings offered some offsets. Japan extended gains on robust corporate profits, a weaker yen, and steady export demand; the BoJ kept to a gradual normalisation, a stance equity markets interpreted as supportive for risk assets.

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“In the midst of chaos, there is also opportunity.”- Sun Tzu

Market Insights

Australian Market

The S&P/ASX 200 Total Return Index rose 2.4% in July, closing above 9,000 points for the first time. This capped a strong run for Australian equities, with small and mid-caps also performing well. The ASX Small Ordinaries Accumulation Index gained 2.8%, marking its fourth consecutive monthly advance and +11.7% since March.

Sector performance was led by Healthcare (+9.5%), Energy (+6.0%), and Materials (+4.1%), all areas that had lagged over the past 12 months. Healthcare rallied on strong updates from CSL and ResMed, Energy was boosted by higher oil and LNG prices, and Materials benefitted from a rebound in gold and lithium miners. Financials (-1.0%) were the notable laggard, driven by a pullback in Commonwealth Bank after a long rally.

Macro conditions were supportive:

• Headline CPI fell to 2.2%, firmly inside the RBA’s target range.
• The labour market softened slightly, with unemployment edging higher, seen as bolstering the case for further RBA easing.
• The AUD remained near 20-year lows, enhancing export competitiveness and attracting offshore inflows.

China’s announcement of large-scale infrastructure spending, coupled with early signs of supply-side reform to tackle industrial overcapacity, helped lift sentiment across key commodities like iron ore, coal, and base metals.

Global Markets

The MSCI AC World Index (AUD) rose 3.2% in July, as growth-oriented sectors: Technology (+6.5%), Communication Services (+4.1%), and Energy (+4.3%) led the way, while defensives like Consumer Staples (-0.4%) and Healthcare (-0.3%) lagged.

United States:

• The S&P 500 and Nasdaq posted new record highs. Mega-cap tech earnings exceeded expectations, particularly in AI infrastructure, semiconductors, and cloud services.
• Retail sales were weaker, while inflation was mixed: headline CPI held steady, core eased marginally.
• The Fed held rates but noted that a cut as early as September was possible if labour market data continued to soften.

Europe:

• The ECB cut rates for a second consecutive month, signalling a measured easing path. Earnings beats in industrials, financials, and luxury supported sentiment, but growth data remained subdued.

Asia:

Commodity markets were mixed: gold prices consolidated near record highs on central bank demand and geopolitical hedging, while oil prices eased late in the month as OPEC+ output discipline came into question.

Japan extended gains on yen weakness and corporate governance reforms.

China posted strong tech sector earnings and reiterated stimulus commitments, but property sector data disappointed, capping broader equity gains.

Global Markets

The MSCI AC World Index (AUD) rose 3.2% in July, as growth-oriented sectors: Technology (+6.5%), Communication Services (+4.1%), and Energy (+4.3%) led the way, while defensives like Consumer Staples (-0.4%) and Healthcare (-0.3%) lagged.

United States:

• The S&P 500 and Nasdaq posted new record highs. Mega-cap tech earnings exceeded expectations, particularly in AI infrastructure, semiconductors, and cloud services.
• Retail sales were weaker, while inflation was mixed: headline CPI held steady, core eased marginally.
• The Fed held rates but noted that a cut as early as September was possible if labour market data continued to soften.

Europe:

• The ECB cut rates for a second consecutive month, signalling a measured easing path. Earnings beats in industrials, financials, and luxury supported sentiment, but growth data remained subdued.

Asia:

Commodity markets were mixed: gold prices consolidated near record highs on central bank demand and geopolitical hedging, while oil prices eased late in the month as OPEC+ output discipline came into question.

Japan extended gains on yen weakness and corporate governance reforms.

China posted strong tech sector earnings and reiterated stimulus commitments, but property sector data disappointed, capping broader equity gains.

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“It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” – Charles Darwin

Market Insights

Australian Market

In June, the S&P/ASX 200 Accumulation Index rose 1.4%, extending its strong performance in 2025. In our opinion, this was largely fuelled by falling risk premia across defensive sectors and optimism around potential rate cuts.  The strong performance was despite continued broader macro volatility driven by trade and geopolitical tensions.

Over the last 12 months (FY25) Investor gains were concentrated in specific sectors: Financials led with +14.5%, followed by Communications (+11%), Consumer Discretionary (+18%), and Technology (+21%). In contrast, Materials (-7%), Energy (-14%), and Healthcare (-1.3%) underperformed, reflecting softer commodity prices, cost volatility, and investor rotation out of defensives into more rate-sensitive equities.

Australia’s rally has been heavily impacted by the narrow moves of large-cap stocks. Remarkably, Commonwealth Bank (CBA), much discussed and debated, alone contributed to 30% of index returns over the past year, highlighting the market’s concentration and raising challenges for active managers navigating these concentrated valuation dynamics.

A critical backdrop to these trends is the U.S. “tariff reset” under President Trump. In early June, steel and aluminium tariffs were doubled to 50%, triggering supply chain adjustments and imported inflation signals across global markets. Australia’s currency weakened as a result, supporting domestic exporters and lifting sectors such as real estate and small caps, which benefit from introspection and perceived local stability.

Energy stocks rallied amid rising oil prices driven by on-going Middle East tensions. Conversely, gold miners lagged despite robust metal prices, in our opinion largely due to firm-level cost pressures curbing margin expansion. Meanwhile, most other Materials firms saw earnings downgrades tied to weaker global demand trends and trade exposure.

Global Markets

On a global scale, the MSCI AC World Index (AUD) advanced 2.6% in June, primarily due to a narrow rebound led by large-cap Tech and Communication Services stocks.

Equities in the U.S. reached all-time highs despite renewed tension in the Middle East and spikes in U.S. tariffs. Notably, coordinated U.S.-Israeli strikes against Iranian facilities prompted temporary yield spikes, but strong early-June inflation data supported ongoing disinflation themes.

However, June’s U.S employment beat reduced the odds of a July Fed rate cut.  We highlight that about 50 bps of easing is still priced in for late 2025.

In Europe, the ECB delivered its first 25 bps rate cut, a milestone showing growing policy divergence between U.S. refrain and European easing. Core inflation eased and services sector stability offset weakness in industrial cyclical sectors.

Asia showed a mixed picture. While China’s equity market endured early weakness tied to a troubled property sector and fading confidence in stimulus, Japan held ground as a defensive alternative for investors amid currency shifts.

Key sector themes included a sharp rotation into Technology and Growth, while traditional defensives: Utilities, Consumer Staples, and Healthcare underperformed in the uptick. Across asset classes, gold held firm at elevated levels, supported by macro-instability and central bank buying tendencies.

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