The June quarter was marked by resilience and recovery in global financial markets, despite a volatile backdrop shaped by shifting trade policies, persistent inflation and geopolitical tensions. After a turbulent start driven by new US tariffs and escalating conflict in the Middle East, markets rebounded strongly as optimism returned on the back of tariff implementation delays and some trade truces, robust corporate earnings and a dose of central bank hope.
The June quarter was marked by resilience and recovery in global financial markets, despite a volatile backdrop shaped by shifting trade policies, persistent inflation and geopolitical tensions. After a turbulent start driven by new US tariffs and escalating conflict in the Middle East, markets rebounded strongly as optimism returned on the back of tariff implementation delays and some trade truces, robust corporate earnings and a dose of central bank hope.
The quarter opened with a bang as new US tariffs sent shockwaves through markets, especially given the simultaneous flare-up in Middle East tensions. But just as quickly as the volatility arrived, markets began to bounce back. Key was the 90-day US-China tariff truce announced in May, which turned sentiment around and reignited appetite for risk assets.
The US markets led the charge higher, with the S&P 500 gaining 5% in June alone, hitting record highs to finish the quarter up almost 11%. Big tech and A.I. related stocks continued their upward march, lifting the Nasdaq Composite by almost 18% for the quarter. In stark contrast, Chinese equities fell in the quarter whilst the weakest equity sectors globally were energy and healthcare down almost 10% and 9%, respectively.
European equities continued their strong run but with a more muted return in the quarter (circa 6%) versus the previous two exceptionally strong quarters. German equities were the highlight, in particular a handful of defence (weapons) names. Asian and broader emerging market equities performed in line with European equities, with Korea and Taiwan boosting Asian equities; whilst Eastern Europe and Latin America boosted emerging markets. Global small companies held their own against large companies whilst growth stocks left value stocks in their wake as investors returned to risk-seeking, pinning their hopes on central bank relief.
Closer to home, the ASX 200 produced a stellar return of 9.50% in the quarter, slightly edging out an equally strong run from small companies. Technology stocks led the charge up almost 30%, followed by financials (up almost 16%) led by the banks (and one in particular - CBA), with weaker than expected economic data seeing investors increasing their bets on RBA rate cuts.
This culminated in a rather sharp fall in Australian bond yields resulting in investors flocking to Australian listed property securities with a 13.7% return, trouncing solid returns from global listed infrastructure and global listed property which also benefited from declining global bond yields.
Bond markets experienced heightened volatility but ended the quarter with positive returns. While inflation remained a lingering threat, expectations of future rate cuts supported a recovery in bond prices. Australian bonds were the pick of the bunch with longer-dated bonds up over 3% in the period followed by a strong return from Australian credit.
Heightened trade risks initially saw the oil price fall off a cliff as traders moved to quicky price in a global recession. However, a flare up in Middle East tensions then saw prices rocket higher before settling lower for the quarter following ceasefire agreements. The US dollar continued to weaken, dropping 10.7% since the beginning of the year, its worst first-half performance in over 50 years. The Aussie dollar rose in contrast to its highest levels since November last year.
The global growth picture remained patchy. The US economy showed signs of resilience, with strong corporate earnings and robust labour markets but underlying concerns about inflation and consumer spending persisted. In the Eurozone, growth remained sluggish, even as inflation ticked up to 2% year-on-year, keeping the European Central Bank (ECB) on a cautious footing. China's recovery remained uneven, with growing doubts about sustainability and continued pressure on emerging markets and commodity prices.
Australia wasn’t immune either. GDP rose just 0.2% in the March quarter, taking annual growth to 1.3%. Private demand, mainly household consumption and investment held things up but weak public spending and adverse weather weighed heavily. Notably, per capita GDP shrank again, reinforcing the story of constrained household finances.
Corporate profits in Australia took a hit, with operating profits down 0.5% in Q1, and 5% lower year-on-year. Wage growth continued but not enough to offset weak consumption sentiment. Housing saw a more stable quarter with home values rising 0.5% in May and 3.3% over the year, though rental growth slowed, likely reflecting affordability pressures and cooling migration.
Across the board, consumer confidence remained fragile, with households reluctant to loosen their purse strings amid inflation uncertainty and political noise. Ambiguity around the trajectory of US Federal Reserve rate moves, as well as decisions by the Bank of England and European Central Bank, contributed to market caution. Hopes for future rate cuts supported risk assets, even as inflation remained a concern.
The US dominated headlines again, with the so-called “Liberation Day” tariffs launched mid-quarter. Initial market nerves were soothed somewhat by the 90-day reprieve agreed with China but the long-term implications are still unclear.
Closer to home, the Australian federal election resulted in a historic landslide victory for the Albanese Labor government, which secured ninety-four seats in the House of Representatives, the highest ever won by a single party in an Australian federal election. This came after the release of the Federal Budget in which forward estimates showed worsening deficits and growing debt, not helped by surprise tax cuts - a sign of fiscal pressure and the challenges of managing growth, inflation and spending all at once.
On the geopolitical stage, the Iran-Israel conflict intensified, adding fresh tension to global markets, especially energy. But this was largely overshadowed by shifting investor focus back to trade dynamics and central bank signals.
The June quarter of 2025 was defined by volatility and resilience. Markets weathered policy shocks and geopolitical flare-ups, ultimately rallying on the strength of technology and AI sectors, trade optimism and hopes for monetary easing. Economically, growth remained uneven, with inflation and consumption risks persisting, especially in Australia and Europe. Politically, governments grappled with fiscal discipline, security challenges, and shifting public sentiment.
As we look ahead, the key drivers for markets over the short-term remain clear: trade policy volatility, central bank decision-making, and geopolitical stability. Over the medium to longer term and in the absence of central bank cash rates returning to zero or near-zero levels, we continue to expect fundamental factors to increasingly drive company returns, as they have done over the very long term.
With the US dollar under pressure, and inflation still hovering above targets globally, monetary policy will play a crucial role in shaping risk appetite in the period ahead. Geopolitical flare-ups and trade tensions are likely to remain front and centre. But underneath the noise, the resilience of earnings, particularly in tech, and signs of rotation into previously unloved markets / sectors could present opportunities for patient and diversified investors.
We remain cautious in our outlook. Asset prices appear stretched, against a backdrop of weakening global economic growth, unsettled trade outcomes and heightened geopolitical risks, with investors increasingly growing desperate for central bank rate relief. Looking ahead, we remain alert to further policy shifts, central bank moves, and the evolving geopolitical landscape. The combination of this and shifting macro conditions continue to suggest the importance of staying diversified and vigilant, while seeking quality assets with valuation support.
As we have reached the end of another financial year, we wanted to send a reminder about income distributions.
The Australian equity market started the year with great gusto with key economic metrics broadly supporting the market. This swiftly turned in February and the local bourse continued to fall throughout the remainder of the quarter. The slide was largely due to the uncertainty over US President Trump's tariffs. Fear and speculation finally became reality as the index began its steep decent in early February, falling circa -10.3%; an official correction and potentially heading towards bear territory and global recession. The Australian market reacted sharply and negatively to the Trump tariffs during the March quarter and overall experienced its steepest losses since the onset of the COVID-19 pandemic. The Australian equity market ended the quarter down (-2.8%).
Although we haven’t received any calls, as we suspect most people are quite familiar with market volatility over the years, we thought this update would put some recent market movements into perspective.