Cutcher's Investment Lens | 30 June - 4 July 2025

Published: 06 July 2025
Updated: 06 July 2025
3 minute read


Weekly recap

What happened in markets

The Australian sharemarket finished stronger last week, despite weakness seen in the Financials sector, specifically the insurers and CBA (-4.0%). A broad-based rebound in commodity prices, notably iron ore (+1.9%), buoyed the Materials sector and miners like South32 (+6.1%), Mineral Resources (+17.6%) and BHP (+3.2%). From an economic perspective, retail sales data showed slower growth than estimated, bolstering the case for another interest rate cut from the RBA this week. 

US sharemarkets rallied last week, with the S&P 500 and NASDAQ both closing at fresh records. Value sectors led the gains, with energy, apparel, homebuilders, banks and airlines all stronger, while momentum style stocks underperformed. Treasury yields rose and the curve flattened after a stronger-than-expected June non-farm payrolls report. The US dollar dipped modestly. Trade policy dominated headlines, with the US and Vietnam making a deal to set 20% base tariffs (40% on trans-shipments). Meanwhile, tariff talks with Europe advanced and US President Donald Trump warned that non-compliant countries face higher rates ahead of the 9 July tariff-pause expiry. Federal Reserve Chair Jerome Powell reiterated that all meetings remain open to policy action, however, trade uncertainty has delayed rate cuts, while the robust jobs print slashed July-cut odds below 5%. From a corporate perspective, Tripadvisor (+34.0%) led the market after Starboard Value disclosed a stake exceeding 9%.

European sharemarkets dipped last week as investors grappled with looming US tariffs and strained EU-China relations. The STOXX Europe 600 fell modestly despite early hopes for easing US-China trade frictions, with Trump’s 9 July deadline threatening 50% duties on €380 billion of EU exports. In response, the EU has pursued a UK-style framework to cap tariffs at 10-20%, potentially limiting GDP drag to 0.6%. Meanwhile, EU-China tensions flared over cognac duties and rare-earth export curbs. Eurozone inflation returned to the European Central Bank’s 2% target, cementing expectations of a July rate hold. ECB minutes and remarks struck a cautiously pragmatic tone amid global uncertainties. Sector-wise, Personal & Household Goods and Travel & Leisure led gains, while Real Estate, Media and Construction & Materials underperformed.

Stock & sector movements 

What caught our eye

The Investment Committee was pleased to deliver a strong result for clients for FY2025, notwithstanding the amount of uncertainty we’ve had to deal with throughout the year. Overall, the financial year was marked by an escalation of geopolitical conflicts, major worldwide elections and an upheaval in global trade thanks to the newly elected US President Donald Trump and his favourite word, tariff.  

After rallying strongly toward the end of 2024 and into January 2025, subsequent to the apparent victory over inflation, sharemarkets underwent a steep downturn from February through April. This pronounced volatility stemmed largely from geopolitical developments and evolving US trade policy, which would then come to overshadow the inflation conversation.

Uncertainty over the scope and timing of US tariffs fuelled fears about long-term global economic repercussions. In particular, the public negotiations between the world’s two largest economies, the US and China, came under intense scrutiny.

During the worst of the sell-off, some major indices, such as the US NASDAQ Composite, slipped into bear-market territory, plunging more than 20% from their February peaks to April troughs.

Yet markets rebounded sharply in April and May. Several factors underpinned the recovery through the June quarter. Much of the uncertainty lifted after the US administration agreed to a 90-day postponement of reciprocal tariffs for most countries, alongside a gradual relaxation or in some cases full exemption of certain sector-specific measures. Meanwhile, US corporate earnings generally surprised to the upside earlier in the year, and central banks outside the US, including the Reserve Bank of Australia, maintained their easing bias. Together, these developments provided broad support for equities.

At the same time, elevated interest rates (compared to recent history) meant that even the more defensive parts of client portfolios provided solid absolute returns. For instance, term deposits yielded roughly 4.40% per annum while the Cutcher & Neale Fixed Income Model generated income of around 6.30% per annum.

 

Looking ahead to FY2026, like many market participants we are expecting a moderation in the pace of returns. Geopolitical risks remain and we would expect more volatility surrounding Trump’s tariff pause deadlines. At the same time interest rates will likely fall further, though not by as much, reducing income generated by cash and fixed interest investments. The benefit being that lower interest rates help buoy spending and investment, supporting share prices. 

The week ahead

The main event this week in Australia is the RBA's monetary policy meeting on 7-8 July. After a number of recent soft economic data points, the market has all but priced-in an interest rate cut. A 0.25% reduction would take our cash rate from 3.85% to 3.60%.

Overseas, Chinese inflation data and US initial jobless claims will be worth watching. The US Federal Budget balance for the month of June will also be released. It will be interesting to see how the US Government's fiscal position has changed, given the increased focus on bringing their deficit down via less spending and more tariff revenue. The market is expecting a US$40 billion deficit, improved from May's US$72 billion deficit. 

 

 

About The Author

Wade is the head of the Investment Services division at Cutcher & Neale and has over 10 years of industry experience in accounting and investment advisory roles.

Ryan is our Portfolio Manager, bringing over 15 years of experience in managing multi-asset investment portfolios with a specialisation in fundamental equity analysis.

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