Economic Update - September 2025

August saw global and Australian markets continue their upward momentum, but with notable divergences across sectors and regions. Investors faced a landscape shaped by shifting tariffs, resilient corporate earnings, and evolving monetary policy.

Overall Market Performance

• Australian Equities: The S&P/ASX 200 rose 3.1% for the month, with nine out of eleven sectors finishing higher. Small caps outperformed, up 8.4%.

• Global Equities: Developed markets posted a modest gain (MSCI World AUD +0.9%), led by the US S&P 500 (+1.9%) reaching record highs. European markets were mixed, while Japan’s Nikkei 225 surged 4.0%.

• Emerging Markets: Underperformed, declining 0.4%, though China rallied on improved sentiment.

• Property & Infrastructure: Australian REITs climbed 4.5%, and global real estate rebounded (+3.6%). Infrastructure returned 1.2%.

• Fixed Income: Bond yields rose globally, except in select markets. Australian bonds offered stability and value, with the RBA cutting rates to 3.60%.

Sector Performance: Positives & Negatives

Australian Equities

• Materials (+9.2%): Led gains, buoyed by commodity optimism and lower rates.

• Consumer Discretionary (+7.6%): Strong on domestic growth and rate cuts.

• Utilities (+5.3%) & REITs (+4.5%): Benefited from defensive positioning and rental growth.

• Health Care (-13.2%): Dragged down by disappointing results from major firms like CSL Ltd (-21.4%) and Telix Pharmaceuticals (-30.6%).

• Best Performers (Month): IDP Education (+57.9%), Pilbara Minerals (+52.7%), Codan (+47.4%).

• Worst Performers (Month): Clarity Pharmaceuticals (-31.8%), Telix Pharmaceuticals (-30.6%), James Hardie (-24.6%).

 Global Equities

• US Corporates: Absorbed most tariff costs, with over 80% of S&P 500 companies beating earnings forecasts. The “Mag 7” tech giants drove robust growth, supported by AI demand and a weaker USD.

• Europe: Mixed results, with Germany’s DAX down and UK’s FTSE 100 up.

• Japan: Strong returns on trade optimism and foreign inflows.

• Emerging Markets: China rallied, but broader EMs lagged due to weak manufacturing and retail data.

 Property & Infrastructure

• Australian REITs: Continued upward trend, supported by strong fundamentals.

• Global Property: Office sector remains challenged, but other subsectors (aged care, data management) show promise.

 Fixed Income

• Australian Bonds: Continue to offer safety and attractive yields.

• Global Bonds: Policy uncertainty, especially in the US and Japan continued to impact these markets.

Key Influences: What’s Driving Markets?

• Tariffs & Trade Policy: US businesses have so far absorbed most tariff costs, but the burden may shift to consumers in coming quarters. Policy uncertainty remains elevated.

• Monetary Policy: Rate cuts in Australia and anticipated further easing in the US and other regions are supporting markets.

• Corporate Earnings: Strong Q2 results, especially in the US, have buoyed sentiment. AI and tech remain key drivers.

• Inflation & Employment: Inflation is receding in Australia, paving the way for rate cuts. US inflation is sticky but not surging; employment is softening but not alarming.

• Valuations: Remain stretched, suggesting modest forward returns and the need for caution.

Looking Ahead: Focus & Risks

• Risks are Balanced: Upside potential exists, but downside risks remain due to policy cross-currents, stretched valuations, and global uncertainties.

• Key Factors to Watch: Tariff impacts, central bank actions, corporate earnings, and consumer resilience will shape market direction in the months ahead.

We continue to advocate for investment diversification across sectors and asset classes, staying alert to changes in trade and monetary policy. With market volatility always possible, having some flexibility - such as holding cash or defensive assets - can help you to respond confidently to whatever comes next. 

As always, if you have any questions or require a review of your investments, please don't hesitate to contact us.

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