Markets Unwrapped: June 2025
Compared to the last few months, June was a relatively quite on the news front. As mentioned last month, no news has seen equity markets continue to climb. The US continued to rally as markets remained bullish on ‘TACO trade’ and believe the final tariff outcomes will not be as detrimental to economies as the ones currently being proposed. This sentiment was held around the world, resulting in most equity markets increasing through June.
Although Australian equities still face oncoming challenges, the rally around the world also found its way to domestic shores. The rally in the financial sector – primarily Commonwealth Bank of Australia – continued, however the beginning of a rotation out of financials and back into resources looks to have started during the last week of June. With the RBA not meeting in June, the market mostly moved on the expectation of a rate cut to begin July – which never came.
The Australian 10-year government bond yield decreased to 4.17% to close out June, as the market was pricing in another 25bps rate cut to begin July. Although the move to more defensive asset classes would be expected during uncertainty, the market gained greater conviction that trade tariffs would be reduced and continued to invest within equities. It is almost certain, we will have significant volatility in the months to come, and the defensive assets could once again see an increase as investors look to hold up their portfolios.
US recession fears continue with the significant inflationary pressures of the tariffs continuing to suggest a much weaker US economy. Despite markets pricing in lower tariffs, this creates significant uncertainty and disconnect between pricing and what the Trump administration is suggesting. This leaves the Fed’s safest option being to hold any interest rate decisions until the effects of tariffs are known. This level of uncertainty in the US economy has also meant that investors are now cautious of the US and beginning to lose confidence in the US dollar continuing to be a safety net through volatility.
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