Superannuation, sometimes known as your “nest egg,” is a key part of your lifestyle flexibility and retirement puzzle.
Read our insights to keep up to date with the latest news, trends and changes related to superannuation advice.
Strong financial market performance in April was underpinned by the announcement of a ceasefire in the Iran War at the beginning of the month. This raised hopes that an eventual reopening of the Strait of Hormuz would allow the passage of crude and other critical commodities to resume. Oil prices slumped below US$100 a barrel initially, and investors rejoiced. However, after high-level peace talks reached a stalemate, Iran said it would require ships to pay a toll to transit through the strait. Trump described the move as “world extortion” and ordered a naval blockade of the strait in a bid to damage Iran’s economy and curb its nuclear program.
Despite the ratcheting up of tensions, the ceasefire largely held throughout the month. On the final trading day, Brent crude briefly reached a fresh wartime high above US$126 a barrel after Axios reported that Trump is weighing new military options. The Australian dollar finished the month at 72c versus the greenback, up 4.4%.
Global equities
A rebound in sentiment across risk assets was reflected in a 9.5% jump in the MSCI ACWI ex-Australian index when measured in local currency terms. However, the strong appreciation of the Australian dollar throughout the month dampened returns for unhedged domestic investors (+5.0%). The rebound was yet more pronounced in emerging market equities, which witnessed a 13.3% return spike in local currency and 9.5% in Australian dollar terms. The gains were largely concentrated in Taiwan and South Korea, as AI semiconductor trades were re-implemented.
Including dividends and in US dollar terms, the benchmark S&P 500 index rebounded 10.5%, the tech-heavy Nasdaq 100 spiked 15.7% (its best month in twenty-three years), while returns for the Dow Jones Industrial index increased 7.2%. The Magnificent Seven jumped 14.9%, as strong corporate earnings continued to exceed expectations. Growth easily outpaced value indices in April, with a strong US earnings season highlighted by most companies beating consensus expectations, and the hyperscalers leading the pack. S&P 500 GICS returns were dominated by double-digit increases in Communications, Technology and Consumer Discretionary.
Australian equities
Back home, the ASX 200 gained a more moderate 2.2%, underperforming domestic small caps, which returned 3.3%. On the domestic front, ASX 200 GICS sector performance for April was led by Technology (+13.7%). At the opposite end of the spectrum, Health Care (-8.4%) failed to participate in the rally, as Cochlear and CSL found new ways to disappoint. A-REITs staged a strong relief rally, up 8.6%, led by sector behemoth Goodman Group. Global property returned 6.6%, with a more muted 1.9% increase in global listed infrastructure.
Fixed interest, currencies & crypto
Fixed interest markets benefited from lower average oil prices, but domestic bonds underperformed as concerns about inflation continued to mount. The Australian composite bond index was barely positive, with returns constrained by government treasuries. Cash outperformed domestic credit, which now sees relative returns between these asset classes broadly in line over the past three years. Global credit was significantly stronger on tighter spreads due to a resumption of risk-on sentiment. Global bond returns, however, were moderated via negative performances by Japan and the UK. Japanese government bond (JGB) returns were especially weak – the Bank of Japan’s more hawkish tone and upward revisions to its inflation forecasts disappointed investors and saw 10-year JGB yields rise to their highest level since 1997.
Meanwhile, oil prices were volatile – in a month where Brent crude reached a new crisis high of US$126.41, the United Arab Emirates announced its withdrawal from OPEC.
The US dollar index (DXY) fell 1.9%, resuming its downtrend seen since the beginning of the Trump presidency.
Finally, Bitcoin jumped 13.7% in April (its best move in twelve months) as investor appetite for risk increased.
Australia
On the economic front, Australia’s headline CPI inflation picked up to 1.1% m/m in March from a steady reading in February. Annual inflation from the monthly series printed at 4.6%, up from 3.7%. Underlying trimmed mean inflation – the RBA’s preferred measure – rose to 0.3% m/m, but held at 3.3% y/y. On a quarterly basis, underlying inflation came in at 0.8% q/q and 3.5% y/y. The Australian Bureau of Statistics said that transport inflation climbed 8.9% y/y, driven by soaring petrol prices.
Meanwhile, the unemployment rate in March held steady at 4.3%. Trend employment growth was just above 30,000 for the month, with no change in the participation rate.
United States
In the US, the advanced estimate for Q1 GDP showed that the economy expanded 0.5% q/q and 2.3% y/y, above expectations. The anticipated rebound in government consumption spending (post the shutdown in Q4) was joined by solid household spending and the ongoing AI infrastructure investment boom. This culminated in domestic final demand rising by a solid 0.7% in the quarter, while net exports were negative. Meanwhile, nonfarm payrolls rose 178,000 in March, the most since late 2024, after revisions showed a sharper decline in February.
US inflation surged in March by the most in nearly four years as the war with Iran sent fuel prices skyrocketing. The CPI rose 0.9% m/m and 3.3% y/y, with a record increase in gas prices responsible for nearly three-quarters of the monthly increase. Turning to monetary policy, an increasingly divided Federal Reserve kept interest rates unchanged in April, but several officials opposed messaging that further rate cuts could be ahead. Amid expectations for a routine vote to hold the benchmark funds rate steady, the committee instead was split along 8-4 lines. The last time four FOMC members dissented was in October 1992.
Rest of the world
Finally, the Bank of Japan kept its short-term policy rate unchanged at 0.75% at its April 2026 meeting, the highest level since September 1995. The widely expected decision passed by a 6–3 vote, amid surging energy prices, with the three dissents calling for a 25bp increase to the policy rate. In its quarterly outlook, the BoJ raised its FY26 core inflation outlook to 2.8% from 1.9%, while trimming the FY26 growth forecast to 0.5% from 1.0%, reflecting softer domestic momentum.
Thanks for reading. If you want to discuss any of the above information or your personal investment strategy, then book a chat with your financial adviser here.
There’s been a lot of noise lately about the federal budget and what it means for younger Australians trying to build wealth. The headlines talk about housing, superannuation, and making things fairer for the next generation.
But buried beneath all of that is a quieter problem, one that doesn’t make it into press releases.
If you’re a millennial who has managed to accumulate some investments — shares, an investment property, a business — realising a larger-than-expected capital gain in any given financial year can trigger a cascade of unexpected tax and benefit consequences that go well beyond your marginal income tax rate.
Here’s what you need to know.
When you sell an asset for more than you paid for it, you make a capital gain. Currently, if you’ve held the asset for more than 12 months, you’re eligible for the 50% CGT discount — meaning only half of the gain is added to your taxable income.
That remaining portion — the taxable half — is your assessable capital gain, and it’s treated just like ordinary income for most purposes. The budget changes summarised here mean that selling an asset after 1 July 2027 may mean the assessable amount rises going forward under a CPI-linked model.
This matters because your assessable capital gain doesn’t just affect your income tax. It flows into a range of other calculations that can affect your family’s finances in ways that are far from obvious.
Division 293 (Div 293) is an additional 15% tax on concessional super contributions for high-income earners. It kicks in when your income — as defined by the ATO for this purpose — exceeds $250,000.
That “income” definition includes your assessable capital gains.
So imagine you earn $180,000 in salary and you’ve made $25,000 in concessional super contributions this financial year (say, through salary sacrifice plus employer contributions). In a normal year, you’re well below the $250,000 threshold.
Now imagine you sell an investment and realise an $80,000 assessable capital gain.
Suddenly your combined income and super contributions for Div 293 purposes is $281,600 — $31,600 above the threshold. The ATO will levy an additional 15% tax on the lower of your concessional contributions or the amount above $250,000. In this case, that’s an extra $3,750 on top of what you expected to pay — though this amount can be paid from your super.
Additionally, Div 293 is not currently indexed, making it a form of silent bracket creep for higher earners.
Family Tax Benefit (FTB) is income-tested. Both Part A and Part B use your family’s adjusted taxable income (ATI) to calculate entitlements — and ATI includes assessable capital gains.
If you’ve been receiving FTB payments throughout the year based on an estimated income, and then you realise a capital gain that pushes your ATI above those thresholds, the result at tax time is a debt to Centrelink.
Here’s an example: a family with two children estimates their income at $110,000 and receives FTB Part A accordingly. They then sell shares mid-year, realising a $60,000 assessable capital gain — bringing their ATI to $170,000. When reconciliation happens, they may find they’ve received thousands of dollars in FTB they weren’t entitled to, and they’ll need to pay it back.
Many families don’t realise this until well after they’ve spent those payments.
The Child Care Subsidy (CCS) is calculated using your combined family income, and the rate you receive can change significantly across income bands.
At the time of writing, families earning under $85,279 can receive up to 90% subsidy. That rate then tapers as income rises, eventually reaching 0% for families over $535,279.
Because assessable capital gains flow into the income figure used to calculate CCS, a one-off gain in a single year can move a family into a meaningfully lower subsidy band — even if their regular income hasn’t changed at all.
For a family with one child in full-time childcare at, say, $150 per day, the difference between an 85% and a 50% subsidy rate represents roughly $16,000 per year in out-of-pocket costs. Even a partial-year impact can be painful.
Like FTB, CCS is reconciled annually. If your CCS payments were based on an estimated income that turned out to be too low because of a capital gain, you’ll receive a reduced subsidy going forward — or have to repay an overpayment.
If you’re expecting a capital gain this financial year — from an investment property, a share sale, a trust distribution, or any other source — it’s worth sitting down with a financial adviser before the end of June, not after.
The difference between a well-timed strategy and an unexpected tax debt can be significant. Understanding how your assessable income interacts with your super, your family payments, and your childcare subsidy is exactly the kind of planning that turns a good financial outcome into a great one.
Important disclaimer: This article is general in nature and does not constitute financial or tax advice. Please consult your adviser for advice specific to your circumstances here.
Yes, it is that exciting time of the year again. Treasurer Jim Chalmers has handed down the 2026-27 Federal Budget and as expected, this year’s announcement focused heavily on the Government’s tax reform agenda, with significant changes proposed for capital gains tax, negative gearing, and discretionary trusts.
For superannuation, the Budget proved to be a quiet night. Following the passage of the Division 296 tax measures and the soon-to-commence Payday Super reforms, the absence of further super changes provides welcome certainty and stability for the sector.
We have summarised the key measures most likely to affect you, your family, and your financial planning below. The full Budget details are available at budget.gov.au.
For our ongoing service package clients, your adviser will be in contact to provide guidance on the changes that may impact your strategy.
IMPORTANT: Please remember that unless specified, these measures are subject to becoming law, so confirm this before taking action.
From 1 July 2027, the 50% CGT discount will be replaced by cost base indexation for assets held longer than 12 months. In addition, a 30% minimum tax rate will apply to net capital gains.
These changes will apply to all CGT assets including property and shares held by individuals, trusts, and partnerships. They will also apply to pre-1985 CGT assets, which under current rules are exempt from CGT. Indexation will use the Consumer Price Index (CPI), similar to the rules that applied between 1985 and 1999, with ATO tools and guidance to support the calculations.
Transitional rules
For eligible CGT assets:
For pre-1985 (pre-CGT) assets, gains accrued before 1 July 2027 will continue to be exempt. Taxpayers will need to determine the value of a CGT asset as at 1 July 2027 as part of their tax return in the year the asset is sold. The ATO will provide tools to assist with this, either through a valuation or a specified apportionment formula.
Exemption for new housing
To support new housing supply, investors in new build residential properties will be able to choose either the existing 50% CGT discount, or the new cost base indexation and minimum tax.
A new build is broadly a dwelling constructed on vacant land, or where an existing property is demolished and replaced with a greater number of dwellings. Knock-down rebuilds or substantial renovations that don’t increase supply will not qualify. Subsequent purchasers cannot access the 50% discount.
Income support payment recipients, including Age Pension recipients, will be exempt from the new 30% minimum tax.
Superannuation funds not impacted
Importantly, these changes do not apply to superannuation funds, including SMSFs, which will continue to be eligible for the existing 1/3 CGT discount on assets held longer than 12 months.
The Government will limit negative gearing for residential property to new builds. From 1 July 2027, losses from established residential properties will only be deductible against rental income or capital gains from residential properties. Excess losses can be carried forward and offset against residential property income in future years.
Transitional rules
For established residential properties:
Exemptions
New builds can continue to be negatively geared before and after 1 July 2027. Properties held in widely held trusts (such as most managed investment trusts) and superannuation funds (including SMSFs) are also excluded. These changes apply to individuals, partnerships, companies, and most trusts. Other asset classes — such as shares and commercial property — are not affected.
The Government will introduce a 30% minimum tax rate on the taxable income of discretionary trusts. The tax will be paid by the trustee, who controls distributions. Beneficiaries (other than corporate beneficiaries) will receive a non-refundable tax credit for the tax paid by the trustee when they declare their trust income. Trustees will be required to calculate, report, and pay the minimum tax, and to notify beneficiaries of their entitlements.
To prevent franking credits being used to undermine the minimum tax, trustees that receive franked dividends will be required to apply their franking credits to pay the minimum tax. Corporate beneficiaries will not receive non-refundable credits for tax paid by the trustee.
Exemptions
The minimum tax will not apply to:
Some types of income will also be excluded, including primary production income, certain income relating to vulnerable minors, amounts to which non-resident withholding tax applies, and income from assets of discretionary testamentary trusts existing at announcement.
Rollover relief will be available for three years from 1 July 2027 to assist small businesses and others who wish to restructure out of discretionary trusts into another entity type, such as a company or a fixed trust.
A new permanent $250 Working Australians Tax Offset (WATO) will apply to income from work, such as wages, salaries, and the business income of sole traders. The WATO will apply automatically after you lodge your tax return, working in a similar way to the existing Low Income Tax Offset (LITO).
It is a non-refundable offset, meaning it can reduce tax payable (excluding the Medicare levy) to nil, but cannot result in a refund. The WATO will lift the effective tax-free threshold for income from work by close to $1,800.
From the 2026-27 income tax year, eligible Australian tax residents earning income from work will be able to claim an instant tax deduction of up to $1,000 for work-related expenses, without needing to itemise their claims or keep receipts.
If your work-related expenses exceed $1,000, you can continue to claim them in the usual way under existing rules (with appropriate records). Charitable donations, union and professional association fees, and other non-work-related deductions can still be claimed separately on top of the instant deduction.
The previously legislated tax cuts will take effect as planned:
This provides a tax cut of up to $268 in 2026-27, and up to $536 from 2027-28.
The Government is adjusting the FBT treatment of electric cars. From 1 April 2029, a permanent 25% FBT discount will apply to all electric cars valued up to the fuel-efficient luxury car tax threshold (currently $91,387).
Transitional arrangements include: electric cars valued up to $75,000 provided before 1 April 2029 continue to receive the existing 100% FBT exemption; and electric cars above $75,000 (up to the luxury car threshold) provided between 1 April 2027 and 1 April 2029 will receive the 25% discount. Eligible vehicles will retain the discount rate that was in place when the arrangement commenced.
There were no new superannuation tax changes announced in this Budget. Three significant super reforms — already legislated — commence on 1 July 2026:
Payday Super
From 1 July 2026, employers will generally be required to pay Super Guarantee (SG) contributions at the same time as salary and wages, instead of quarterly. This is intended to make it easier for you to monitor your SG entitlements and reduce the incidence of unpaid super. The new rules also include changes to the earnings base for calculating SG and the SG charge, and changes to how the Maximum Contributions Base is applied.
Division 296
From 1 July 2026, an additional 15% tax will apply to the portion of earnings attributable to a Total Super Balance (TSB) above $3 million, with a further 10% (totalling 25% extra) on the portion attributable to a TSB over $10 million.
The tax is assessed to individuals (not the super fund), with impacted individuals having the choice to pay the tax personally or to elect for it to be released and paid from their super. To support the calculations, super funds will be required to calculate each member’s share of taxable earnings for Division 296 and report it to the ATO. First assessments will be issued after 30 June 2027 based on the 2026-27 income year. The rules will only tax realised capital gains accrued from 1 July 2026 onward.
Paid Parental Leave Super Expansion
Following the introduction of super on Commonwealth-funded Paid Parental Leave from 1 July 2025, Paid Parental Leave itself expands to six months from 1 July 2026. Eligible parents will receive super contributions over this longer period, helping reduce the long-term impact of career breaks on retirement savings.
The Government will permanently extend the $20,000 instant asset write-off for small businesses with turnover under $10 million. Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool. Provisions preventing small businesses from re-entering the simplified depreciation regime for five years after opting out will continue to be suspended until 30 June 2027.
For tax years commencing on or after 1 July 2026, companies with aggregated annual global turnover under $1 billion will be able to carry back a tax loss and offset it against tax paid up to two years earlier. Loss carry-back applies to revenue losses only and is limited by a company’s franking account balance.
From 1 July 2028, start-up companies with aggregated annual turnover under $10 million that generate a tax loss in their first two years of operation will be able to use the loss to generate a refundable tax offset, limited to the value of fringe benefits tax and withholding tax on Australian employee wages in the loss year.
The Government will amend eligibility for the Pension Supplement for recipients absent from Australia. The full rate of Pension Supplement will be extended from 6 weeks to 12 weeks for those temporarily absent from Australia, and will cease for those residing permanently overseas or temporarily absent for longer than 12 weeks. Under current rules, the Pension Supplement reduces to the basic amount after the first 6 weeks of a temporary absence.
Additional funding of $2.2 billion over five years has been allocated to improve service delivery, including funding for frontline staffing, enhanced safety at Services Australia centres, the Services Australia Cyber Security Uplift program, and improvements to the myGov platform.
The Budget includes several measures aimed at strengthening the aged care system.
Residential aged care supply
An additional 5,000 residential aged care beds per year will be funded, principally for those with limited financial means, supported through building subsidies and an increase to the Accommodation Supplement. Additional funding has also been provided for dementia care supports, including expansion of the Hospital to Aged Care Dementia Support program.
Improving access to home care
The Government will fully fund personal care services such as showering, dressing, and incontinence aids for all Support at Home recipients. Faster access to Support at Home places has also been announced, alongside improvements to assessments, hardship applications, and the end-of-life pathway.
Better care for older Australians
Additional funding has been provided for strengthened regulatory, governance, and quality arrangements, sector viability, and workforce supports.
The Government will remove the age-based uplift of the Private Health Insurance Rebate from 1 April 2027. Under current rules, older policyholders receive a higher rebate percentage than younger policyholders on the same income. For example, single people with income below $101,000 currently receive rebates of 24.188% (under 65), 28.139% (age 65-69), and 32.158% (age 70+).
From 1 April 2027, older policyholders will no longer receive this higher rebate. Savings will be reinvested in the aged care sector.
The Government will provide funding to extend the operation of the Consumer Data Right (CDR) and explore enabling taxpayers to share certain ATO-held data through it. The CDR currently allows individuals to share their banking and energy data with new providers to access better offers. Extending this to ATO data could potentially allow you to authorise the sharing of your tax-related data with your financial adviser, something the advice industry has long advocated for.
The Government will provide $17.8 million over four years to strengthen governance, supervision, and enforcement of managed investment schemes. Funding will support ASIC’s data capabilities in supervising the sector, strengthen governance requirements (in partnership with the Office of the Australian Auditing and Assurance Standards Board and Treasury), and consult on new data collection powers. ASIC will partially meet the cost through cost recovery.
The Government will provide $86.3 million over four years to deliver Phase 2 of the Counter Fraud Strategy, modernising the prevention and detection of fraud in the tax and super systems. This will enhance the ATO’s ability to detect and prevent fraud in real time, and expand live monitoring of fraudulent account access—including for high-risk superannuation changes.
The ATO will also be given new powers to pause the recovery of tax debts for taxpayers who are victims of fraud by tax intermediaries, and to waive those debts in appropriate circumstances. Existing garnishee powers will be expanded to include jointly held assets where such arrangements are being used to frustrate recovery actions.
If you have any questions or would like further clarification on any of the measures outlined in the 2026-27 Federal Budget, please feel free to book a chat with your adviser.
Financial markets were rocked in March by the war in Iran and the closure of the Strait of Hormuz, which sent oil prices surging and stoked widespread fears of stagflation. Volatility returned with force as risk assets sold off sharply, the US dollar strengthened and Treasury yields rose across the globe. Credit spreads widened as investors repriced risk throughout the month.
The US Federal Reserve held the funds rate unchanged at 3.5%–3.75% at its March policy meeting. In contrast, a divided RBA lifted the cash rate by 25bp to 4.10% in a 5–4 decision its second increase for the year, effectively reversing two of last year’s three rate cuts.
Global equities
A severe oil price shock saw global equity markets slump in March, with the MSCI ACWI ex-Australian index down 6.2% when measured in local currency terms. However, the depreciation of the Australian dollar throughout the month buffered losses for unhedged domestic investors (-3.3%). Losses were more pronounced in emerging market equities, where a resurgent US dollar and an abrupt loss of risk appetite sliced around 10% off returns (-10.5% in local currency and -9.5% in Australian dollar terms).
Diversification provided little benefit to investors during March, as asset correlations increased on heightened risks of stagflation — a scenario of economic stagnation and high inflation that has historically proven exceptionally challenging for policymakers and markets alike. Growth and value indices both posted steep losses, but small caps saw some of the biggest falls as investors sought insulation from macro risks and geopolitical events.
Including dividends, the benchmark S&P 500 index declined 5.0%, the tech-heavy Nasdaq 100 lost 4.8%, and the Dow Jones Industrial index fell 5.2%. The Magnificent Seven declined 5.6%, with losses deepest among small cap growth stocks.
Australian equities
At home, the ASX 200 lost 7.2%, led lower by the resources and technology sectors. The Small Ords fell 11.0%, while A-REITs slumped 11.2% as rising discount rates weighed heavily on valuations. Global property fell 6.6%, with listed infrastructure posting a more muted decline of 3.0%.
Sector performance for March was almost entirely negative, with Energy (+20.4%) and Utilities (+4.9%) the standout performers, and Consumer Staples (+1.7%) the only other GICS sector to deliver a positive total return. At the other end of the spectrum, Materials (-13.0%) fell hardest, closely followed by Information Technology (-12.5%).
Fixed interest, currencies, commodities, crypto
Fixed interest markets failed to provide a safe haven as inflation risks rose on the back of higher oil prices. The Australian composite bond index fell 1.4%, while the global aggregate bond index lost 1.9%. Cash proved to be the month’s shining light, with bills delivering a positive 0.32%.
Gold lost its glitter in March, with the US dollar spot price declining 11.6%. The sharp change in trajectory was likely driven by investors seeking liquidity as risk was taken off the table — the ASX gold sub-sector slumped more than 20% over the month, leaving it down 11% year to date.
In stark contrast, crude oil prices jumped over 50% in March. Brent Crude (+63%), the benchmark for two-thirds of globally traded crude, posted its strongest monthly rise since the 1970s. Prices briefly came within reach of US$120 a barrel, with downstream effects flowing through to Australian petrol prices amid signs of panic buying and reports of supply shortages at some service stations.
Australia
Australia’s GDP grew 0.8% quarter-on-quarter and 2.6% year-on-year for the December quarter, well ahead of consensus expectations. While consumer spending was relatively subdued, government spending jumped 0.9% over the quarter. Since mid-2022, public sector spending has been a key driver of output growth while also contributing to elevated inflation and eroding household purchasing power. At year end, the household saving ratio climbed to 6.9% from 6.1%, its highest level since September 2022 suggesting households may be banking income gains rather than lifting discretionary spending, as expectations of higher interest rates in 2026 continue to mount.
A surge in part-time jobs lifted domestic employment by 48,900 in February, following a gain of 17,800 in January. However, the headline unemployment rate rose to 4.3% from 4.1%, as workforce participation increased. Meanwhile, the February CPI inched down to 3.7%, and trimmed mean inflation printed at 3.3%. The monthly inflation report was released after the RBA had already pulled the trigger on a 25bp rate hike at its March meeting, its second increase for the year.
United States
In the US, core inflation cooled in February, with the CPI ex-food and energy rising 0.2% month-on-month and 2.5% year-on-year — the slowest annual rise since March 2021. Lower prices for used cars and motor vehicle insurance helped offset higher costs for gasoline and groceries. The pullback in underlying inflation also reflected lower housing costs, with rent of primary residence rising just 0.1%, the least in five years. Including food and energy, headline CPI advanced 0.3% month-on-month and 2.4% year-on-year.
The Federal Reserve held US interest rates steady at its March meeting. The Fed’s quarterly summary of economic projections pointed to higher inflation, steady unemployment and a single rate cut for 2026, as officials assessed the unfolding conflict in the Middle East. Chairman Powell noted that rising oil prices would push up inflation, but that the duration and scope of that upward pressure remained unknown. He also signalled that the Fed would typically look through the inflationary effects of a short-term energy supply shock when determining the path for rates, a nuanced message that markets will be watching closely in the months ahead.
A sharp increase in geopolitical tensions added to what was an already intriguing start to 2026. The US staged a daring raid on Venezuela, capturing its president and asserting de facto control over Venezuelan oil and security policy. This was followed by an escalation of tensions between the US and Iran, after Iranian authorities cracked down violently on anti-government protestors. Elsewhere, President Trump also made further threats to acquire or otherwise control Greenland, announcing he would impose a 10% tariff starting February 1st (rising to 25% by June) on goods from eight European nations due to their opposing stance on the matter. Subsequently, Trump eased his rhetoric on Greenland, and investors breathed a collective sigh of relief.
Global equities
A surge in the Australian dollar throughout January impacted global returns for unhedged domestic investors. US dollar weakness was a key driver of outcomes across financial markets, with the “Aussie” appreciating above US$0.70 in late January before ending the month just below this level.
Global equity markets rallied in January when measured in local currency terms, with the MSCI ACWI ex-Australian index up 2.5%. However, the appreciation of the Australian dollar during this period pushed returns for unhedged domestic investors well into the red (-2.0%). The same effect could be seen for global hedge fund performance, where exchange rate movements saw a 2.2% local currency gain morph into a 2.4% loss in Australian dollar terms. Meanwhile, the weak US dollar and more signs of a sustained global cyclical recovery combined with bullish investor sentiment led to another searing rally in emerging market equities (+8.8% in local currency and +3.6% in Australian dollar terms). Performance was again driven by tech-heavy Asian markets (Korea, Taiwan) and key commodity producers (Brazil, Chile), while Mexico revelled on previous policy easing and the weaker US dollar.
US equity markets began 2026 on a positive note, extending the gains seen since mid-November. Returns were characterised by broader participation and underpinned by buoyant earnings growth expectations. A surge in investor interest among small and mid-cap stocks saw equal-weight indices outperform cap-weighted peers, while cyclicals outpaced defensives. This rotation is likely a reflection of investors’ confidence in the strength of the US economy and a search for value away from last year’s winners in the mega-tech and high growth space.
The benchmark S&P 500 index briefly traded above 7,000 in late January and delivered a US dollar-denominated total return of 1.4% for the month. The Dow Jones Industrial Average posted a record high in January, as it delivered a total return of 1.8%. The tech-heavy Nasdaq 100 underperformed peers, posting a 1.2% total return, led by a more modest 0.6% gain for the Magnificent Seven. Among S&P 500 GICS sectors, Energy was the clear winner, producing a 14.4% total return. Materials was the next best performer in the month, up 8.7%.
Australian equities
Australian shares pushed higher and small caps continued to outperform their large cap peers, with a similar pattern observed across key US benchmarks.
Also, further strength in the Resources sector drove the ASX 200 to a 1.8% total return, albeit underperforming the 2.7% outcome seen in the Small Ordinaries. A-REITs finished January in the red, as a modest fall in sector-behemoth Goodman Group was exacerbated by a broad-based sell-off on the back of renewed interest rate fears.
Fixed interest, currencies, commodities, crypto
The impact of global macroeconomic events were felt across financial markets, with searing rallies in crude oil and gold. Meanwhile, crypto took another leg down to begin the year, as speculative demand switched into a host of precious metals.
On the economic front, the US Federal Reserve hit the policy pause button after three rate cuts in late 2025, to add fuel to what could already be a strengthening economy. Domestic fixed interest returns were able to return to positive territory, although, cash continued to outperform the composite bond index as disappointing December CPI data increased the probability of an increase in the RBA cash rate.
Australia
In domestic economic news, a strong December jobs report quickly unwound the weakness seen in the prior month as the unemployment rate fell to 4.1%. The focus, however, was on the December CPI figures. Annual headline CPI of 3.6% and trimmed mean CPI of 3.4% in the RBA’s closely-watched quarterly data series again exceeded expectations. In the monthly data series, a key contributor was electricity, which rose 21.5% in the year to December. Notably, in the absence of any rebate program, the rise would have been just 4.6%. Annual services inflation was also strong, up 4.1% from 3.6% in November, driven by rents and domestic holiday travel.
United States
In the US, GDP expanded at an annualised rate of 4.4% in the third quarter, with robust growth driven by consumer spending, a rebound in exports and higher government outlays. Notably, the US personal saving rate fell to 3.5% in November 2025, with real personal consumption expenditure per capita growing by 2% from a year ago. Meanwhile, President Trump said he will nominate Kevin Warsh to be the next chairman of the Federal Reserve, prompting mixed views about how readily the incoming central bank leader will shake off his hawkish past and push the board to lower borrowing costs. The announcement on the final trading day of the month resulted in Gold slumping 10%, while Silver plummeted nearly 30%.
Rest of the world
The International Monetary Fund (IMF) upgraded its 2026 global growth forecast to 3.3% as businesses and economies adapt to US tariffs and a continued AI investment boom that has fuelled asset markets and expectations of steep productivity gains. The IMF sees technology investment as boosting activity in the US, Spain and the UK. Among other major economies, the IMF expects China’s 2026 growth to reach 4.5%, down from a stronger-than-expected 5% outcome in 2025. Notably, it also upgraded growth for Japan due to the new government’s fiscal stimulus package. The IMF also said that global inflation was forecast to continue to decline, from 4.1% in 2025 to 3.8% in 2026.
Elsewhere, India’s industrial production accelerated to 6.7% y/y in November, to mark the sharpest pace of expansion since October 2023. The robust outcome pushed back against concerns that aggressive tariff hikes by the US government would drive a sustained slowdown in the Indian economy. However, in early February, Trump agreed on a deal to slash tariffs on India to 18% from the current level of 50% after Modi claimed that India would stop buying Russian oil. The rupee reached a record low in late January as the rebound in oil prices increased domestic US dollar demand for major energy importers. This was then magnified by the record-setting INR 17.2 trillion in borrowing outlined in the new federal budget.
Volatility returned to financial markets in November as investors battled with changing interest rate expectations and questioned lofty stock valuations. In a month that saw the temporary end to the record-breaking US government shutdown, markets were none the wiser as to the current state of the US economy, with important jobs and inflation data postponed until mid-December. Meanwhile, higher-than-expected domestic inflation data derailed returns across Australian shares and bonds, with some analysts now expecting an increase to the RBA cash rate in 2026.
A late rally on growing optimism that the US Federal Reserve (the Fed) will cut interest rates at its December meeting saw developed market global shares finish the month about even.
Global equities
As sentiment soured, the S&P 500 at one point declined 5.7% from its October high, its largest retracement since the tariff-related slump in early April. Subsequent dovish remarks by key Fed officials placed a December rate cut back on the agenda, driving a strong recovery into month-end.
Including dividends and in US dollar terms, the S&P 500 posted its seventh consecutive monthly gain, up 0.3%, and the Dow Jones Industrial Average returned 0.5%. Meanwhile, the tech-laden Nasdaq fell 1.6% (ex-dividends), as cracks started to appear in the AI narrative. The Magnificent 7 stocks were mixed, with four of the group falling nearly 5% in November. Emerging markets also struggled, losing -2.6%.
While the S&P 500 was unable to post a new closing high for the month for the first time since May, its return drivers broadened, with the S&P MidCap 400 and S&P 500 equal weighted indices delivering total returns of around 2%. The S&P SmallCap 600 outperformed its larger cap peers, producing a total return of 2.7% in November.
As an aside, in the month of December, the S&P 500 has historically posted gains 72% of the time—the best rate of any month.
Australian equities
On the domestic front, the ASX 200 underperformed peers—and by some margin—finishing the month down -2.7%. Returns were dented by an unwelcome rise in consumer inflation that coincided with the cessation of temporary electricity subsidies. Listed property trusts also underperformed, losing -3.9%, driven by a -10% decline in sector-giant Goodman Group.
Fixed interest, currencies, commodities, crypto
Global fixed interest returns finished November in positive territory, easily outperforming the domestic bond sector after its inflation shock. Australian 10yr government bond yields ended the month above 4.5%, as futures traders abandoned expectations for an RBA rate cut in 2026.
Amid these cross-currents in sentiment, global bond markets eked out small positive returns in November. Yield curves steepened, but expectations around longer-term US inflation remained in check.
The same could not be said for domestic fixed interest, which was broadly weaker over the month. Money markets reacted to disappointing Australian CPI data that pushed long term yields higher, and well above equivalent maturities in US bond markets.
Elsewhere, crude oil posted another monthly decline on increased supply, while precious metals were stronger and remained on target to deliver their best annual return since 1979. Bitcoin, on the other hand, fell victim to a sharp negative shift in sentiment and momentum, seeing its price fall sharply over the course of the month.
Australia
In domestic economic news, the RBA kept interest rates on hold at its November policy meeting and said it now expects consumer prices to peak at 3.7% in June 2026. This prompted traders to remove positions for a rate cut next year, while some economists warned that the cash rate would need to be lifted to bring inflation under control.
Complicating matters, the annual CPI for October jumped to 3.8%, well ahead of expectations and above the RBA’s recently revised peak estimate. This was the first release of a complete monthly CPI report, however, the RBA said it would still focus on the quarterly inflation report for now.
United States
The resolution (for now) of the US government shutdown allowed for the release of long-awaited employment statistics for September. Jobs growth was well ahead of consensus, but seen as outdated.
Adding to the data void, the Bureau of Labor Statistics announced that it will not publish an October employment report, instead incorporating those payrolls figures into its November report and delay its release until after the Fed’s final meeting of the year.
Key inflation data met a similar fate, while calls for the Fed to push back its policy meeting fell on deaf ears. Notably, private data releases relating to job cuts and consumer sentiment were disappointing, and highlighted that risks of stagflation in 2026 could not be ruled out.
Rest of the world
Finally, the European Commission upgraded its 2025 growth forecast for the Eurozone economy to 1.3%, up from its 0.9% projection in its spring forecast. Growth is then expected to slow slightly to 1.2% in 2026, before rising to 1.4% in 2027. They noted that economic activity exceeded expectations in the first nine months of the year, supported by a surge in US exports as companies stocked up ahead of Trump’s tariffs, and stronger-than-expected investment in equipment and intangible assets.
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Financial markets continued their upward trend in October, with almost every major asset class delivering positive returns. The global rally continued despite alarming trade news about China’s export controls on rare earth minerals. Later in the month, the Fed reduced its funds rate by a further 0.25% to a range of 3.75%-4%. Although the US government shutdown remained ongoing, growing inflation risks meant that further rate relief in December was “not a foregone conclusion”. This forced traders to recalibrate their interest rate forecasts, leading to a spike in volatility.
Global equities
Global equity markets successfully navigated the increased volatility seen in October to reach new highs, led by large-cap growth stocks, notably the ‘Magnificent 7’. The month began with the US government shutting down as political opponents failed to agree on key budget initiatives. This resulted in a void of official data and heightened speculation that the labour market could moderate.
Investors were shocked when China expanded its export controls on rare earths and related refining technologies. Trump responded with the imposition of an additional 100% tariff on Chinese imports and export controls on critical software from the US targeting technology/software with strategic significance. A subsequent meeting between Presidents Trump and Xi eased trade tensions and resulted in a reduction in US tariffs on fentanyl and a one-year delay in rare earth export controls.
The unhedged MSCI ACWI ex-Australian index was up 3.6% in Australian dollar terms.
The move was led by US markets, which rallied on robust Q3 earnings (+10.7% y/y for the S&P 500) and mostly positive guidance. Including dividends and in US dollar terms, the benchmark US S&P 500 posted its sixth consecutive gain in October (+2.3%), with the Magnificent 7 contributing more than 80% of the return. The S&P MidCap 400 had a tougher time, delivering investors a loss of 0.5%, while total returns for the SmallCap 600 fell 0.9% over the month. The Dow Jones Industrial Average returned 2.6% in October, while the Nasdaq 100 jumped 4.8%, as robust Q3 earnings saw growth stocks easily outperform their value peers.
Japan was also strong, with the TOPIX rising after Sanae Takaichi became Japan’s first female PM and President of the Liberal Democratic Party. Takaichi aims to pursue expansionary fiscal policies, which the equity market is viewing as broadly positive. The easing of trade tensions later in the month boosted emerging markets, particularly in Korea and Taiwan. In Latin America, a decisive victory by President Javier Milei’s party led to strong performance across its equity markets.
Australian equities
On the domestic front, the ASX 200 underperformed global peers—returning just 0.4% in the month—as investors increased their focus on inflation risks and its ramifications for interest rates. The local market benefited from a rally in the Resources sector (+4.0% including dividends). Energy and Banks were also stronger, but Info Tech slumped 8.4% in October.
Listed property fared slightly better, delivering 0.6%. Meanwhile, the Small Ordinaries again easily outperformed their large cap peers, returning 1.9% in October.
Fixed interest, currencies and commodities
Elsewhere, fixed interest returns were broadly stronger. In credit markets, global high yield modestly outperformed investment-grade. Meanwhile, it was a month of two distinct halves for government bonds. Yields fell sharply in the first half of October amid heightened trade fears and uncertainty about the state of the labour market in key economies. Later in the month, a rebound in yields was driven by disappointing inflation data and concerns over high levels of public sector borrowing.
Australia
In domestic economic news, the headline unemployment rate for September rose unexpectedly to 4.5% as more workers entered the jobs market. Later in the month, the September quarter CPI figures came in higher than expected, with trimmed mean inflation of 1.0% q/q and 3.0% y/y. Headline inflation rose to 1.3% q/q and 3.2% y/y, driven by fast-rising housing construction costs.
Overall, price rises were broadly based across the CPI basket; however, the removal or reduction of electricity bill subsidies exacerbated pressures. Following the inflation print, many economists walked back their expectations of another rate cut in 2025 (including this one).
United States
The Fed cut interest rates for the second consecutive month by 0.25% (to 3.75% ̶ 4%) by a 10-2 vote, with 1 vote for no change and 1 vote for a 0.50% rate cut. Markets characterised the move as a ‘hawkish cut’ and pared back expectations for another move at the December meeting.
The US CPI increased 0.3% in September and by 3% over the last twelve months. Meanwhile, the Beige Book for October revealed opportunistic price hikes were occurring due to the reduced competition triggered by higher import tariffs.
Rest of the world
Elsewhere, China’s official Non-Manufacturing PMI was virtually unchanged in October. The data highlighted weakening economic momentum since July, weighed down by the property sector and global trade headwinds. There were contractions in new orders, employment and foreign sales. On the Continent, the Euro Zone economy expanded by 0.2% in the September quarter and by 1.3% over the year, which was slightly above expectations. Spain (+2.8%) led the major economies over the twelve-month period, followed by France (+0.9%), Italy (+0.4%) and Germany (+0.3%). Finally, annual inflation in the UK remained steady at 3.8% in September, while GDP growth in August inched higher by 0.1% m/m.
September proved to be a positive month for most investors as financial markets continued to navigate the tense geopolitical landscape. The global rally has been supported by optimism around AI, strong corporate earnings from key technology companies and the resumption of the Federal Reserve’s rate-cutting cycle. The Fed reduced its funds rate by 0.25% to a range of 4%-4.25% in its first move this year, citing risks to the labour market. While consumer confidence has dipped in the US as the labour market has softened, consumer spending, income growth and industrial output have remained robust.
US company earnings often dominated the financial news headlines during the month, typically printing above expectations. Investors were pleased that some retailers increased their 2025 guidance, with Q2 sales tracking well above previous management guidance.
Global equities
Global equity markets continued to rally in September, with the unhedged MSCI ACWI ex-Australian index up 2.4% in Australian dollar terms. Most of the market’s focus remained on the US, where, including dividends and in US dollar terms, the benchmark US S&P 500 was up 3.7% in September, while the S&P MidCap 400 increased just 0.5% and the S&P SmallCap 600 gained 1% for the month. The Dow Jones Industrial Average returned 2% in September. The tech-laden Nasdaq 100 jumped 5.6%, including dividends, marking its best September since 2010.
Among GICS sectors, Info Tech did the best for the month, adding 7.2%, whilst Materials performed the worst, falling 2.3%. Of note, ‘Magnificent 7’ stocks accounted for almost two-thirds of the S&P 500’s total returns in September.
Australian equities
On the domestic front, the ASX 200 lost 0.8% in the month as investors became more concerned about the inflation outlook. Excluding dividends, the ASX 200 dropped 1.4%. Listed property gave back 3.1% following a period of gains. Meanwhile, the Small Ordinaries easily outperformed large cap peers, returning 3.4% in September inclusive of dividends.
In contrast to US markets, the Materials sector experienced a strong rally (+6.1% including dividends), as the gold sub-industry surged 25%, driven by a booming US dollar gold price. Utilities added 0.7%, while the remaining sectors posted losses. The more defensive GICS sectors struggled (namely, Telcos, A-REITs, Health Care and Staples). But, the worst was saved for Energy (-9.7% including dividends), which plummeted on the back of falling crude oil prices and a collapse in a foreign takeover bid for Santos.
Fixed interest, currencies and commodities
In bond markets, investors were more bullish as 10-year US Treasurys closed at 4.16%, down 7 basis points from the previous month, while 30-year bonds nudged 2 basis points lower to 4.74%. Credit spreads narrowed further, helping the global credit benchmark to return over 1% in September. However, domestic fixed interest underperformed global peers. While the Reserve Bank of Australia (RBA) kept interest rates on hold at 3.60% in September, as expected, the monthly CPI data was above consensus. This suggested September’s quarterly inflation data might exceed the RBA’s forecast, resulting in money market traders repositioning towards just one rate cut in early 2026.
Finally, the Australian dollar was modestly higher, while gold soared more than 10% on rising geopolitical and tariff-related inflation risks. Oil closed 3.2% lower for the month, finishing below US$62.
Australia
In domestic economic news, employment unexpectedly fell by 5,400 jobs in August, following a gain of 24,500 in July. Consensus was for 21,000 jobs to be created. The unemployment rate remained at 4.2%, as workforce participation stepped lower. Meanwhile, headline monthly inflation data for August revealed a 3% annual increase, up from 2.8% in July. The move was driven by increases in housing, food and alcohol & tobacco prices. Excluding volatile items such as fruit, vegetables, fuel and holiday travel, annual inflation was 3.4% higher. However, annual trimmed mean inflation, which measures core or underlying inflation, fell to 2.6% from 2.7% in July.
At the end of September, the RBA left interest rates on hold at 3.6%, as was widely expected. Money market traders scaled back bets that another rate cut would be delivered by November. Ahead of the decision, the implied probability of a rate reduction to 3.35% had declined to 50%, from a near certainty at the beginning of the month. Those odds have since fallen below 40%. In contrast, many economists were still predicting that a November rate cut was the more likely outcome.
United States
In the US, the Fed cut rates (-25 basis points) for the first time since December 2024. Chair Jerome Powell again intonated that the US central bank is increasingly concerned about balancing inflation risks against a cooling jobs market. Interestingly, only the recent Trump appointee, Stephen Miran, dissented the decision in support of a 50 basis point cut.
However, Fed officials appear highly divided on this outlook. The quarterly Summary of Economic Projections noted nine out of the 19 Fed members are in favour of 50 basis points of additional cuts this year, while six think they should keep rates unchanged. The Fed’s inflation target of 2% remains elusive, with Powell effectively conceding they won’t hit this goal “anytime soon.”
Rest of the world
The UK economy slowed in the second quarter of 2025 to just 0.3% growth, from 0.7% in the first three months of the year. Adjusting for a rising population, largely driven by high levels of immigration, GDP per capita was up 0.9% in the year to June, after being stagnant in 2024.
1. US stocks kept climbing: July marked another winning month for US markets, with the S&P 500 and Nasdaq both hitting record highs. Low volatility and strong early earnings gave investors confidence.
2. Australian shares started the year strong: The ASX 200 gained 2.4% in July, led by healthcare, energy, and real estate investment trusts. Small caps and A-REITs outperformed the broader market, while financials slipped.
3. Growth lagged value in Australia: Locally, value stocks outperformed growth, the reverse of the global trend. Globally, megacap tech continued to lift growth stocks ahead of value.
4. Bonds were quiet but yields eased late in the month: Higher yields weighed on fixed income early, but softer jobs data and cooler inflation helped bring yields down as July ended.
5. Copper prices plunged on tariffs: A sudden 50% US tariff on semi-finished copper products—paired with an exemption for refined copper—triggered a swift sell-off in futures markets.
6. Australia’s job growth slowed, inflation eased: June saw only 2,000 new jobs and a fall in full-time employment. Inflation dropped to 2.1% annually, giving the RBA more room to keep rates on hold.
7. Global growth showed mixed signals: US GDP rose at a strong 3% pace in Q2, China’s growth slowed slightly but stayed near target, and Eurozone growth improved as inflation hit the ECB’s 2% goal.
There were several key news items during the month of July, headlined by the passing of the One Big Beautiful Bill Act. The package reduced uncertainty around the funding of Trump’s domestic agenda and made his 2017 tax cuts permanent, while delivering promised new tax breaks. Though the package adds significantly to public debt, it also cuts health and food safety-net programs and zeroes out dozens of green energy incentives.
Other global news focused on announcements of trade agreements with key trading partners, including Japan and the EU. Financial markets viewed this positively, as a reduced risk of an escalating trade war.
While global markets performed more moderately in local currency terms, unhedged domestic investors benefited from the weaker Australian dollar throughout the month. Global equity markets continued to move higher through July with the unhedged MSCI ACWI ex-Australian index up 3.4% in Australian dollar terms (+2.2% in local currency). The weaker Australian dollar also benefited emerging market equities, contributing 40 basis points to its return of 3.8%.
In the US, the US S&P 500 was up for a third consecutive month, as was the Dow Jones Industrial Index. Meanwhile, the tech-heavy Nasdaq rose for the fourth straight month. Both the S&P 500 and Nasdaq reached record highs in July, helped by low volatility and a strong start to the quarterly earnings season.
Despite a surprise pause to the cash rate by the RBA in early July, domestic investors enjoyed a strong start to the new financial year. The ASX 200 climbed 2.4% including dividends, only to be outpaced by its small cap peers (+2.8%) and the AREIT sector (+3.3%). Healthcare led the way following a difficult period, with the sector clouded in policy uncertainty. Energy was strong on the back of higher oil prices and a takeover bid for Santos. It is noteworthy that both sectors remain in the red over the past twelve months. At the opposite end of the spectrum, Financials lost ground in July as the major banks gave back some of their gains. Overall, the MSCI Australia Growth index underperformed its Value equivalent, while the opposite was true at the global level, thanks to strong performance by megacap tech stocks.
Outcomes across the fixed income markets were relatively muted in July, as higher yields weighed on returns. Domestic fixed interest finished marginally in the red, after the RBA surprised markets at its July board meeting and held the cash rate at 3.85%, preferring to wait for the quarterly inflation data. Yields subsequently eased throughout the month after the release of weak jobs data and better-than-expected consumer inflation data.
Finally, copper prices slumped sharply in July after Trump implemented 50% tariffs on semi-finished copper products, while unexpectedly exempting refined copper. This caused a dramatic unwind of speculative positions and erased a premium that had built up in US copper futures markets, with traders racing to redirect copper supplies originally destined for the US.
Australia
In domestic economic news, the June labour market report was weaker than expected as employment increased by just 2000 jobs, following an unexpected fall of 1000 workers in May. In June, part-time employment grew by 40,000 people, offset by a 38,000-person fall in full-time employment. Later in the month, CPI inflation eased to 0.7% in the June quarter and to 2.1% from a year ago. Trimmed mean inflation – the RBA’s preferred measure – slowed to 0.6% over the quarter and to 2.7% annually.
United States
The passing of the One Big Beautiful Bill Act will add $3.4 trillion to the nation’s $36.2 trillion debt, largely through lower tax revenues, according to the nonpartisan Congressional Budget Office.
Meanwhile, US consumer prices increased by the most in five months in June, up 2.7% from a year ago, versus 2.4% in May. Excluding food and energy, core inflation increased 2.9%, up from 2.8%. Also of note, an advanced estimate of second quarter US economic growth revealed an annualised 3% expansion due to a surge in net exports.
Rest of the world
Elsewhere, China’s economy grew 5.2% in the second quarter from a year earlier, slowing from the first-quarter’s 5.4% pace. China has set a full-year growth target of around 5%. The world’s second-largest economy has so far avoided a sharp slowdown, in part due to policy support and a fragile trade truce with the US. Also, China’s home prices fell at a faster pace in June, underscoring growing speculation for additional measures to revive the property market.
Finally, June quarter GDP in the Euro Area expanded 1.4% versus a year ago, according to preliminary data. This was cautiously greeted by markets, as inflation is now at the European Central Bank’s 2% target. By month’s end, traders were expecting no further cuts to the ECB’s key policy rates.
It was an extraordinary start to April, with Trump formally announcing reciprocal tariffs in what he declared “Liberation Day” for US trade policy. Trump set a base 10% tariff on all US imports. Canada and Mexico were exempt from the 10%, but were subject to a 25% tariff on goods not covered by their existing free trade agreement. Higher rates were announced for a host of countries based on a combination of their tariffs, consumption taxes, government support and trade surpluses with the US.
A tit-for-tat escalation of tariffs proceeded to take place between the US and China. Trump then announced that he had suspended the reciprocal tariffs for most countries for 90 days, to allow for a period of ‘negotiation’. However, the tariffs on China were subsequently increased to a total of 145%.
The period between the 2nd and 9th of April (between Liberation Day and the announcement of a suspension) was tumultuous. Financial markets found few havens outside of gold, with Trump finally yielding to pressure from the bond market, where the long-term cost of debt was escalating. A relief rally was then followed by a steady rise in equities and decline in bond yields, with traders increasing expectations that the US Federal Reserve (the Fed) would recommence its rate-cutting cycle.
The MSCI ACWI ex-Australia index delivered a total return of -1.7% to unhedged domestic investors in April, as a 2.5% appreciation in the Australian dollar weighed on global equity returns.
The S&P 500 declined for a third consecutive month, down 0.8% as stunning tariff policy announcements added to market volatility. The S&P 500 briefly entered bear territory (-20%) on an intraday basis on April 7th after reaching an all-time high on February 19th. The S&P MidCap 400 decreased 2.3% in April, while the S&P SmallCap 600 lost 4.3%. Meanwhile, the Dow Jones Industrial Average declined 3.2% in April. Finally, the Nasdaq 100 gained 1.5% for the month, while the broader Nasdaq Composite index improved 0.9%.
Throughout April, the dramatic changes to trade policy led to several companies lowering or withdrawing guidance due to elevated uncertainty. Overall, US markets underperformed global peers. Growth stocks outperformed their value counterparts, mainly due to a slump in energy stocks.
Emerging markets performed in line with the broader global MCSI index, as Mexico and Brazil delivered positive returns.
ASX shares ultimately finished strongly in April, with the XJO price index trading in a 13.3% range during the month. There were strong performances across most sectors, with energy and resources being key exceptions. Some investors viewed the domestic market as being relatively shielded from changes in US trade policy, with big pension funds said to be seeking the safety of Australian blue chips. In terms of sectors, Telcos, Info Tech and A-REITs were the best performers, buoyed by falling yields and from rising market expectations that interest rate cuts were in the offing. The Gold sub-sector also posted another strong month, thanks to the uncertain environment.
Fixed interest markets also experienced higher-than-average volatility during the month. Investor fears of stagflation ultimately gave way to a greater focus on the likelihood of recession. The potential for a growth slowdown saw Fed funds rate traders positioning for four rate cuts in 2025 and a fifth cut early in the new year, with a similar outlook for Australian interest rates. Credit spreads moved in line with changes in sentiment throughout April, with higher quality credit markets remaining resilient.
Finally, commodity prices weakened late in the month, with oil prices slumping amid rising recession fears and a decision from OPEC+ members to increase output. Copper prices also finished lower. The gold price marked a new all-time high, exceeding US$3,500 on April 22nd.
Australia
In domestic economic news, another strong jobs report kept the unemployment rate at 4.1% in March. At the beginning of the month, the RBA held the cash rate at 4.1%, just before the Trump announcement on reciprocal tariffs that disappointed markets. Minutes from the RBA’s April board meeting released later in the month revealed the board was open to cutting interest rates after the federal election, once it had the latest information on inflation and trade policy. Indeed, March quarter CPI data revealed that the RBA’s preferred measure of underlying inflation dipped below 3% for the first time in more than three years.
United States
On the economic front, the US posted a stronger-than-expected jobs report for March, but the unemployment rate ticked up to 4.2% on increased workforce participation. Workers’ average hourly earnings rose by 3.8% over the year, a bit lower than the 4% forecast and nearing the 3.5% gains seen as consistent with the Fed’s 2% inflation target. Elsewhere, underlying US inflation cooled broadly in March, indicating some relief for consumers before widespread tariffs that risk contributing to price pressures. The core CPI, which excludes food and energy, increased by the least in nine months to be up by 2.8% over the year. The overall CPI posted a small decline from a month earlier, the first decrease in nearly five years, and rose 2.4% over the year.
In early April, during a sharp sell-off in financial markets, Fed Chairman Jerome Powell noted, “While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected. The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
Rest of the world
Elsewhere, on the Continent, the European Central Bank cut interest rates by 0.25%, bringing the deposit rate to 2.25%. The monetary policy statement viewed the disinflationary process as “well on track” and noted that the “outlook for growth has deteriorated owing to rising trade tensions.” Finally, increasing confidence about the prospect of lower interest rates provided support for European government bond markets throughout April.
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