Economic Update - July 2025

Luke Palmer
Jul 14
2 min read

Overall Market Performance

The month of June saw a mixed performance across global markets. Australian equities continued to rally, with the S&P/ASX 200 Accumulation Index increasing by 1.4%, ending the financial year up 13.8%. Global equities also rose, with Developed Markets equities gaining 2.5%. The US equity markets outperformed, supported by the growing chances of interest rate cuts and the avoidance of a recession.

Sector Performance

Australian Equities:

Energy: The Energy sector led the performance with a 9.0% increase, driven by sharp rises in oil prices due to war tensions in the Middle East.
Financials: Financials saw a 4.3% rise, supported by resilient macroeconomic signals.
Communications: Communications posted a 1.6% increase, benefiting from stable market conditions.
Defensive Sectors: Materials (-3.1%), Consumer Staples (-2.3%), Health Care (-1.1%), and Utilities (-0.2%) underperformed, reflecting ongoing global uncertainty.

Global Developed Equities:

Growth Stocks: Growth stocks outperformed with a 4.4% increase, while Value stocks gained 3.1%.
Quality and Momentum: Quality and Momentum factors produced strong positive gains of 3.3% and 2.8%, respectively.
European Markets: European equity markets were stable, with Germany’s DAX Index declining by 0.4% and the UK’s FTSE 100 Index dropping 0.1%.

Emerging Market Equities:

China: China rallied as trade concerns eased, with the CSI 300 rising 2.5%.
Japan: The Nikkei 225 in Japan gained 6.6%, marking its best monthly performance since February 2024.

Property & Infrastructure:

Australian Residential Property: The market continued to grow, with the Cotality home value index increasing by 0.6% in June.
Global Real Estate: Global real estate equities underperformed, increasing by 0.4%.

Fixed Income:

US Treasury Yields: U.S. 10-year Treasury yields fell 17 basis points, ending the month at 4.23%.
Eurozone Yields: Yields were mixed, with the UK 10-year Gilt yield rising 17 basis points to 4.49%.

Positive and Negative Influences

Positive Influences:

Interest Rate Cuts: The growing chances of interest rate cuts in the US supported equity markets.
Ceasefire Agreement: The ceasefire agreement between Israel and Iran boosted market sentiment.
Resilient Macroeconomic Signals: Hard macroeconomic signals remained resilient, with investors watching closely how US policy changes will interact.

Negative Influences:

Geopolitical Tensions: Ongoing tariff policy uncertainty and geopolitical tensions in the Middle East had minimal negative effects on risk assets.
Sluggish GDP Growth: March quarter GDP grew by 0.2%, falling short of market expectations.
Declining Retail Sales: Retail sales in the US declined by 0.9% in May, more than the 0.7% expected by the market.

Focus of Financial Markets Going Forward

Looking ahead, financial markets are expected to focus on several key factors:

Tariff Uncertainty: Tariff uncertainty will remain, but the baseline becomes clearer as the worst-case scenario is seemingly off the table.
Interest Rate Cuts: The potential for higher yields from the passage of the Big Beautiful Bill and higher tariffs would present headwinds for equities.
Geopolitical Risks: Conflicts in Ukraine, Israel, and Iran remain contained, but any escalation could impact market sentiment.
Macroeconomic Data: Investors will continue to monitor hard data for confirmation of further deterioration or improvement in economic conditions.

We hope this summary provides an overview of the market performance for the month. If you have any specific questions or would like to discuss further, please don't hesitate to contact us.

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