Pitcher Partners Investment Services (Melbourne) | The information in this article is current as at July 9, 2025.
Investors endured a wild ride over the second quarter of 2025.
The events leading into and immediately post ‘US liberation day’ prompted a sharp correction in equity markets, led by the US. Despite many lingering issues remaining around global trade, geopolitical conflicts and tensions, and the threat of US stagflation – it was the swift de-escalation of retaliatory tariffs between China and the US, coupled with the potential passing of Trump’s tax cut bill that helped stage one of the quickest recoveries in post war history. The three major US equity markets were close to, or posting new record highs by the end of the period.
The tech sector (+22%) returned to the fore, fuelling the rebound in the S&P500 driven largely by a strong earnings season for the mega-caps and renewed investor confidence. Investors drove growth stocks higher more broadly, and the Nasdaq finished the quarter up 18%. The recovery was primarily driven by the large / mega caps, with mid and small caps lagging respectively.
Major world equity markets also generally finished the quarter in positive territory. Euro stocks were soft, though a weakening US dollar boosted capital flows from investors looking to reduce their US exposures. The German DAX continued its Q1 rally demonstrating its ongoing resilience to US-Europe trade tensions, while Asian stocks also benefited as tensions eased. Globally, energy and healthcare sectors were down which weighed on UK equities. Australian equities posted a strong quarter (+9.5%) driven predominantly by multiple expansion despite a relatively muted outlook for forward earnings.
Despite unrelenting pressure from the US president, the Federal Reserve kept US interest rates on hold, opting to wait and assess the threat of higher inflation from tariffs. In contrast, the ECB brought rates down to 2.0% with cuts in April and June as easing inflation bought some breathing room. The market still expects a further cut this year. The RBA followed up its February rate cut with another in May, with the market expecting a year end cash rate of just 3%. Core inflation now sits relatively comfortably in the upper end of the RBA’s target band, while economic activity over the period was generally softer than expected.
In May Trump’s impending tax-and-spending bill prompted Moody’s to downgrade the US credit rating from the top rung, the last of the big three ratings agencies to do so. The yield curve steepened as 30 year Treasuries topped 5.0% and touched their highest levels since 2007. Investor concern about the federal deficit and financial sustainability increased hesitancy about longer term US dollar denominated debt, with several foreign nations reducing their holdings. Global credit spreads widened in the aftermath of the ‘Liberation Day’ tariff announcement but recovered and finished the quarter tighter. European bond yields fell.
Gold saw modest gains to finish the quarter over US$3,300 as momentum faded and investors discounted the worse-case tariff scenario. The pausing of the tariffs boosted industrial metals including aluminium (+2.5%), lead (+1.6%) and copper (+1.6%) although commodities broadly underperformed. Increased OPEC production dragged the oil price down over the quarter despite Middle-Eastern geopolitical conflict and tensions causing a short term spike in June, where Brent briefly hit $80 a barrel.
The Australian dollar appreciated by 5.3% against the US dollar over the period, closing the quarter at $0.6581.
| Financial Markets at 30 June 2025 | |||
| Indices | Current Level | 3 Months | 1 Year |
| ASX 200 | 8,542.3 | 8.9% | 10.0% |
| ASX 200 (Acc) | 113,592.8 | 9.5% | 13.8% |
| US S&P 500 | 6,205.0 | 10.6% | 13.6% |
| Japan Nikkei | 40,487.4 | 13.7% | 2.3% |
| UK FTSE 100 | 8,761.0 | 2.1% | 7.3% |
| MSCI World (AUD) | 21,947.1 | 6.0% | 18.5% |
| German Dax | 23,909.6 | 7.9% | 31.1% |
| French CAC | 7,665.9 | -1.6% | 2.5% |
| HK Hang Seng | 24,072.3 | 4.1% | 35.9% |
| Shanghai Comp | 3,444.4 | 3.3% | 16.1% |
| ASX 200 Prop (Acc) | 81,915.8 | 13.7% | 14.0% |
| Global Prop | 2,859.3 | 2.6% | 8.4% |
| Australia 2Y Bond Yield | 3.21 | -47 bp | -96 bp |
| Australia 10Y Bond Yield | 4.16 | -22 bp | -15 bp |
| US 2Y Bond Yield | 3.72 | -16 bp | -103 bp |
| US 10Y Bond Yield | 4.23 | +2 bp | -17 bp |
| Commodities | Current Level | 3 Months | 1 Year |
| Gold (oz) | 3,303.1 | 5.7% | 42.0% |
| Oil (Barrel) | 65.1 | -8.9% | -20.1% |
| Iron Ore (Tonne) | 88.5 | -7.2% | -13.2% |
| Aluminium | 2,597.5 | 2.5% | 0.3% |
| Copper | 9,869.0 | 1.6% | 1.2% |
| Lead | 2,045.0 | 1.6% | -2.1% |
| CRB Index | 452.3 | -8.7% | 13.9% |
| Currencies | Current Level | 3 Months | 1 Year |
| AUD/USD | 0.6580 | 5.3% | -1.3% |
| AUD/EUR | 0.5581 | -3.3% | -10.3% |
| AUD/GBP | 0.4790 | -0.9% | -9.1% |
| AUD/JPY | 94.76 | 1.2% | -11.6% |
| AUD/RMB | 0.658 | 5.3% | -1.3% |
Source: Morningstar, IRESS
