“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.
…To read the full version, or listen to a summary, please click the links below:
