Market Comment
After a month of relative calm on the US trade policy and tariff front, global share markets edged higher over May 2025. Investors are reading the tariff situation better with signs that suggest that they may have seen the worst of the volatility associated with the introduction of the US trade tariffs. The market appreciated the break in constant tariff related announcements and resumed the cautious optimism that we anticipate will supported by the economic data to follow in the upcoming months. Remember, unilateral tariff rates are expected to resume on the 9th of July 2025.
ASX Commentary:
Breaking News: 23rd June 2025 – US enters the Middle East conflict.
The US attacked key Iranian nuclear sites over the weekend. Oil prices pushed higher towards US$80 per barrel as the world awaits a response from Iran.
Month-ending May 2025 – Australian shares posted strong returns over May 2025 reflecting the rebound post the tariff announcements. Shares finished (+4.20%) for the month and (+4.31%) over the last three months.
Information Technology was the best performing sector posting gains of (+19.83%). Utilities were the worst performing sector finishing (+0.31%) for the month. Commodity markets ended mixed with Iron Ore closing at US$99.12 per tonne at the end of May 2025 with a monthly loss of (-0.64%) and losses of
(-7.28%) for the previous three months. Oil (WTI) closed higher at US$60.79 a barrel at the end of May 2025 resulting in gains of (+4.43%) for the month and down (-12.86%) over the last three months.
In AUD terms, the global share markets posted one month return of (+5.41%). The US posted returns of (+5.68%), Asia ex Japan (+4.52%), Japan (+3.46%), the UK (+3.83%), Europe (+4.17%) and the Emerging Markets (+3.71%).
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.
The RBA left the target cash rate at 3.85% following the 20th of May 2025 board meeting. The short-term outlook remains uncertain as we head towards the financial year end however, medium to longer term, we remain cautiously optimistic for global growth to emerge.
Focus for investors:
- US Politics – President Donald Trump continues to adjust trade tariffs, pushing ahead with immigration promises, and now the Middle East conflict. We will have to wait and see how this will impact Australia in terms of trade given this new conflict.
- 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 stalling with retail spending mixed. US retail sales MOM were (+0.01%) in April 2025 down from revised (+1.7%) previously.
- Growth – China is the focus with growth prospects the central theme. China GDP is resilient around the 5.4% 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 will be interesting this time around to see what impact the tariff situation has been for forward earning guidance.
- Commodities – the latest conflict may boost commodity prices for oil however, softening demand for energy and EV related materials remains as global demand slows. Trade tariffs are the wildcard
