Adviser Connect – July 2025

As we navigate the complexities of the financial landscape, it’s important to stay informed about how investment markets are performing. The second quarter of 2025 (April 1 – June 30) presented both challenges and opportunities for investors. In this article, we take a closer look at how investment markets performed over the quarter, and we highlight some of the key economic factors from across the world that influenced these outcomes. 
 

Australia

Share market: The S&P/ASX 200 Index, which represents Australia’s top 200 companies, was up +9.5% over the quarter. Positive returns were largely due to strong performance in the finance sector, driven by some of Australia’s major banks, while retailers and technology companies also saw strong returns. 

Interest rates: Australia’s inflation rate remained within the Reserve Bank of Australia’s (RBA) target range at 2.4% in Q1, unchanged from Q4 2024. Core inflation, which excludes volatile items like food and energy, slowed from 3.2% in Q4 2024 to 2.9% in Q1 2025. The RBA reduced the cash rate from 4.10% to 3.85% during the quarter but kept the rate on hold in July, despite markets expecting another cut. Markets are currently expecting two to three further rate cuts by the end of 2025. 

Housing market: The Australian housing market, as measured by CoreLogic's Home Value Index (HVI), recorded an increase of +1.4% in Q2 2025, following a +0.9% increase in Q1 2025. The increase was attributed to falling interest rates, which have acted as a catalyst for renewed momentum. 

Australian dollar: The Australian dollar (AUD) continued to recover against the US Dollar over the quarter, rising +5.2% from 62.5 to 65.7 cents. The increase comes off the back of a sharp drop in the AUD towards the end of 2024, that was mainly caused by shifts in US and Australian interest rate expectations and a negative outlook for the Chinese economy, which has impacted Australia's export sector. 
 

New Zealand

Share market: The S&P/NZX 50 Index saw a +2.7% rise in Q2 2025, with the positive return due to strong performance in key health care and communications companies.

Housing market: Following minor monthly falls of -0.1% in both April and May, the CoreLogic Home Value Index showed a +0.2% gain in June 2025, meaning that prices over the quarter remained unchanged. The median property value nationally is now NZ$815,389. 

Interest rates: The official cash rate was reduced from 3.75% to 3.25% during Q2 2025, with the market expecting a further reduction to around 3.00% by the end of 2025. New Zealand’s economy, which was in recession in Q2 and Q3 of 2024, exited recession in Q4 2024 as the economy began to grow again, helped by the recent reduction in interest rates, and the growth continued in Q1 of 2025. Inflation has moderated to 2.5% in Q1, slightly higher than the 2.2% recorded in both Q3 and Q4 of 2024. 
 

United States

Share market: The S&P 500 Index rose by +10.9% in Q2 2025, as volatile share markets recovered from the uncertainty around tariffs.  As fear around tariffs faded, tech companies that had seen negative returns in Q1 experienced a sharp rebound in Q2 2025. 

Interest rates: The Federal Reserve has kept interest rates on hold at 4.5% in all its meetings so far in 2025. This is in line with the Fed’s goals of achieving maximum employment and price stability. The Personal Consumption Expenditures (PCE) inflation rate stood at +2.3% at the end of May, while core inflation had eased to +2.8%. 
 

China

The Chinese share market saw muted positive performance in Q2 2025, underperforming global shares in general. Sentiment has been helped in Q2 as China and the US agreed to cut their respective tariff rates. However weak domestic economic data in China has continued to hamper Chinese share market performance. The government continues to provide financial support to the economy, and economic growth was 5.2% in Q2 2025, down slightly from the 5.4% recorded in both Q4 2024 and Q1 2025. 
 

Global trade and geopolitical uncertainty 

Q2 2025 started off with a sharp selloff in financial markets, in response to the unveiling of severe tariffs by the US administration on global trading partners. However, investor’s fears receded later in the quarter as tariffs were paused for 90 days, and a trade deal was reached between the US and China. Later in the quarter there were elevated levels of uncertainty as conflict broke out in the Middle East, but the market reaction was muted, and tensions quickly subsided.  

We continue to monitor the major drivers of markets and their impact on Resolution Life Australasian portfolios. While investing always involves managing uncertainty, the current environment is mired in elevated uncertainty. The best form of defence for portfolios is to continue to be well diversified, with exposure to a range of asset classes that can help during volatile times.   

<sub>Sources:  
1. S&P/ASX 200 Index Performance - ASX  
2. NZX 50 Index Performance – NZX  
3. S&P500 Index Performance - US  
4. Reserve Bank of Australia Monetary Policy - RBA  
5. Reserve Bank of New Zealand Official Cash Rate - RBNZ  
6. Australian House Prices – CoreLogic Home Value Index 
7. NZ house Prices – CoreLogic Home Value Index   
8. Australian Bureau of Statistics - ABS  
9. FactSet  
10. Bureau of Economic Analysis – BEA 
11. Trading Economics</sub> 
 

Links to sources

•    Modest value growth in NZ property re-emerges in June | CoreLogic New Zealand
•    Falling interest rates drive an acceleration of growth in housing values through Q2 | CoreLogic Australia
•    Consumer Price Index, Australia, March Quarter 2025 | Australian Bureau of Statistics
•    Personal Consumption Expenditures Price Index | U.S. Bureau of Economic Analysis (BEA)
•    United States Core Inflation Rate