Economic Update - August 2025

Financial markets have experienced a dynamic month, with significant developments across various sectors. Here's a comprehensive summary of the market's performance, sector highlights, and key factors influencing financial markets going forward.

Overall Market Performance

The global equity markets posted positive returns in July, with the MSCI World Index rising by 3.1%. The S&P 500 Index in the US increased by 2.2%, reaching record highs at the month's end. Emerging markets outperformed developed markets, with the MSCI Emerging Markets Index gaining 3.8%.

Sector Performance

1. Australian Equities

• Performance: The S&P/ASX 200 Accumulation Index gained 2.4% in July, with the index up 11.9% over the past 12 months.

• Positive Influences: Health Care (+8.8%), Energy (+5.4%), Utilities (+5.1%), and Information Technology (+5.2%) were the top-performing sectors.

• Negative Influences: Financials (-1.0%) declined due to a rotation away from Banks into Resources.

2. Global Developed Equities

• Performance: Developed market equities rose by 3.1% in July.

• Positive Influences: Growth stocks (+2.8%) outperformed value stocks (+1.2%), with quality (+0.4%) and momentum (+0.2%) factors also producing positive gains.

• Negative Influences: US equities slightly underperformed compared to their global peers after a strong June.

3. Emerging Market Equities

• Performance: Emerging market equities gained 3.8% in July.

• Positive Influences: China rallied as trade concerns continued to ease, with the CSI 300 rising 3.5%.

• Negative Influences: Mixed USD performance amid ongoing trade uncertainty and the rising US government deficit.

4. Property & Infrastructure

• Performance: The S&P/ASX 200 A-REIT Accumulation Index rose by 3.3% in July.

• Positive Influences: Attractive subsector valuations and rental growth in areas like aged care, data management, and supply chains.

• Negative Influences: Global real estate equities underperformed, falling by 0.2%.

5. Fixed Income

• Performance: Global financial markets experienced a more stable environment in July.

• Positive Influences: Australian bond yields offer good value and provide safety from overseas volatility.

• Negative Influences: US fiscal and monetary policy uncertainty is distorting the defensive qualities of Global Bonds.

Focus of Financial Markets Going Forward

The focus of financial markets going forward will be on several key factors:

1. Trade Agreements: Progress in trade agreements, particularly between the US and major economies, will continue to influence market sentiment.

2. Economic Indicators: Investors will closely monitor economic indicators such as GDP growth, unemployment rates, and inflation.

3. Monetary Policy: Central bank decisions, particularly from the US Federal Reserve and the Reserve Bank of Australia, will play a crucial role in shaping market expectations.

4. Geopolitical Tensions: Ongoing geopolitical tensions, particularly in the Middle East, will impact commodity prices and market stability.

5. Corporate Earnings: Upcoming earnings reports will be closely watched for signs of continued growth and profitability.

In conclusion, the financial markets have shown resilience amid global uncertainties, with positive performances across various sectors. Investors should remain vigilant and stay informed about key developments that could impact their portfolios.

We hope you find this summary helpful! If you have any further questions or need additional information, feel free to ask.

Thanks to our research partners at Lonsec for assisting with the preparation of this Economic Update.