“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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