Market Comment
July proved to be a month of relative calm on the US trade policy and tariff front as the market digested the impact of the unilateral Tariffs so far. Inflation ticked higher along with the jobless rate which will worry the Central Banks. The Fed elected to “hold” this time around at 4.25%-4.50%. Analysts expect a drop of 0.25% at the next Fed meeting 16th/17th September 2025 but it is not a given.
Global share markets edged higher over July 2025 for most developed countries. Investors are experiencing record highs in the share markets which will make them nervous. Buying the dip on pullback tends to be the play. Cautious optimism is the underlying theme that we anticipate will be supported by the economic data to follow in the upcoming months.
ASX Commentary:
Month-ending July 2025 – Australian shares posted positive returns over July 2025 reflecting the ongoing rebound post the tariff announcements. Shares finished (+2.36%) for the month and (+8.16%) over the last three months.
Healthcare was the best performing sector posting gains of (+9.05%). Financials ex-AREITS was the worst performing sector finishing down (-1.02%) for the month. Commodity markets ended mixed with Iron Ore closing at US$99.12 per tonne at the end of July 2025 with a monthly gain of (+4.92%) and losses of (-0.64%) for the previous three months. Oil (WTI) closed higher at US$69.26 a barrel at the end of July 2025 resulting in gains of (+6.37%) for the month and up (+18.98%) over the last three months.
In AUD terms, the global share markets posted one month return of (+3.14%). The US posted returns of (+4.00%), Asia ex Japan (+4.00%), Japan (+0.30%), the UK (+2.66%), Europe flat (+0.00%) and the Emerging Markets (+3.84%).
Currency movement was a bonus with the AUD/USD weakening from 0.6550 at the end of June 2025 to finish July 2025 at 0.6469 down (-1.24%) which benefitted unhedged international holdings in terms of performance. It is currently trading at AUD/USD 0.6505 (15-08-2025).
While inflation may still be the focus of economists, interest rates remain the key driver to forward looking market expectations and, on that front, Central banks are looking to ease further especially with growth stalling , tariff-based inflation, and the new threat to global peace. Reporting season is mixed so far with earnings misses coming out late which is not a good pointer but early days.
The RBA reduced the target cash rate by 0.25% to 3.60% following the 11th/12th of August 2025 board meeting. The short-term outlook is looking positive as we head towards the second half of the year however, medium to longer term, we remain cautiously optimistic for global growth to emerge. We are mindful that September & October tend to experience volatility post reporting season however we still prefer to “buy the dip” as opportunities present.
Focus for investors:
- US Politics – President Donald Trump continues to adjust trade tariffs, pushing ahead with immigration promises, and now playing peacemaker to the Russia/Ukraine conflict. We will have to wait and see how the geopolitics turns out but markets seem unperturbed.
- Central banks – With the US effectively “On Hold” for the moment, the rest of the world remains in easing mode (apart from Japan).
- Inflation – is showing a mild uptick globally as the US tariffs kick in however, the US print revealed n unchanged a 2.7% in July 2025 with retail spending rising. US retail sales MOM increased by (+0.06%) in June 2025 up from (-0.9%) previously.
- Growth – China is the focus with growth prospects the central theme. China GDP is resilient around the 5.0% level despite the property market concerns. The benefits of rekindling growth include productivity gains from which Australia will also benefit given, they are our biggest trading partner.
- Company Profits – company reporting season is proving interesting this time around with earnings misses coming late onto the scene. Guidance has shifted down from 7% to 5.6% which may mean a pull back for markets ahead.
- Commodities – the latest conflict may boost commodity prices for oil however, demand for energy and EV related materials appears to have bottomed as global demand improves. Trade tariffs are the wildcard.
