NEWS + VIEWS – 05/12/2025
MARKETS
In the US, share markets are ending the week with modest gains. The S&P 500 and NASDAQ indices rose as investors priced in a likely rate cut by the Federal Reserve. Softer US economic data has fuelled hopes that the Fed may cut rates soon, which has lifted risk assets globally.
The ASX 200 has rebounded in the past two weeks, driven by strength in consumer staples, technology and materials/mining sectors. Energy and mining stocks – especially those sensitive to commodity prices – rallied, helped by oil prices and a broader global risk-on mood.
THE YEAR IN REVIEW
Trump’s tariff policies
In April, a new wave of US tariffs triggered a global sell-off. Many share markets plunged, driven by fears that trade restrictions would raise costs, hurt global growth and disrupt supply chains. Fears of a global trade war hit nearly every sector, though sentiment later stabilised.
Exporters were hit hard with miners and industrials seeing sharp share price declines as investors feared reduced demand. Manufacturers faced higher input costs and financials were also sold off as trade-driven volatility tends to reduce business confidence and borrowing demand.
Geopolitical tensions
Ongoing global conflicts (e.g. war in Ukraine, tensions in the Middle East) also created volatility and pushed investors to reassess risk, which impacted market sentiment.
Shifting interest rate expectations
As inflation and economic signals fluctuated, markets oscillated between hopes for rate cuts (supporting equities) and fears of sticky inflation (hurting valuations). More recently, periods of stronger-than-expected consumer spending and inflation in Australia have raised the possibility of interest rate hikes by the Reserve Bank (RBA), creating headwinds for rate-sensitive sectors.
Technology & AI-related optimism
A strong rally in global tech and AI-related companies has been one of the strongest forces lifting global share markets this year. Investor enthusiasm for AI – from data centres and cloud infrastructure to semiconductor chips, cybersecurity, and automation – has driven large gains in tech-heavy indices and boosted valuations for companies seen as AI beneficiaries. This optimism is fuelled by rapid advances in AI capability, soaring demand for computing power, and expectations that AI will deliver long-term productivity gains across almost every industry. As a result, capital has flowed heavily into tech and AI-linked stocks, while companies in sectors such as finance, retail, logistics, and healthcare have increased investment in AI to stay competitive. However, some analysts cautioned that parts of the AI trade showed early signs of “bubble-like” behaviour.
Market rotation away from overheated blue-chip stocks
Some major companies (e.g. Commonwealth Bank (CBA) and CSL) have seen their valuations re-assessed, and the market has gravitated toward more value-oriented or commodity/resource-linked stocks. CBA consistently trades at one of the highest price earnings ratios of any bank in the world. After a huge rally to around $190 mid-year, analysts increasingly flagged CBA as overvalued and as interest rate expectations softened, its share price fell toward $150 per share.
CSL’s share price this year was driven down mainly by weakness in its vaccine arm as U.S. flu-vaccination rates fell, multiple cuts to earnings guidance, and a major restructuring plan that included spinning off Seqirus and closing under-performing plasma centres, which together triggered several sharp selloffs. Although its core plasma-therapy business performed well early in the year and supported revenue, investor confidence deteriorated after CSL warned of slower future growth and higher one-off costs, leading to a significant re-rating of the stock.
Commodity-price swings
Fluctuations in commodity demand, metal and oil prices, and supply-side pressures impacted resource-heavy economies and influenced commodity-linked equity markets. As global supply-side disruptions and demand dynamics pushed up commodity prices, major mining and resources companies listed on the ASX benefited significantly. Higher prices for iron ore, copper, lithium, and gold boosted revenues and share prices of BHP, Rio Tinto (RIO), Fortescue (FMG), and mid-tier miners.
So that was the year that was, not that it’s over yet. We would like to wish all clients and their families a merry Christmas and a prosperous new year.
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