FY25 Year End Report: July 2025 Market Update

In Summary: FY25 Year End Report and Market Update.

Global share markets surged in June, capping off a strong quarter despite heightened tensions in the Middle East. Israel’s strikes on Iran raised fears of oil supply disruption but eased after a ceasefire was announced. Meanwhile, the Trump administration’s “One Big Beautiful Bill Act” passed Congress, extending first-term tax cuts and sparking fresh debate over US debt. The US Federal Reserve held rates steady but signalled a more dovish stance amid falling inflation, while the Reserve Bank of Australia (RBA) is expected to follow suit as domestic inflation declines.

Key sector takeaways

Global Developed Shares

Global developed share markets climbed strongly, with the MSCI World ex Australia index up 2.5% (in AUD terms) for the month and 5.9% the quarter. US shares reached record highs, driven by gains in mega cap and AI-related stocks. Share markets were buoyed by optimism around fiscal policy, prospects for rate cuts and the view that tariffs would not severely hamper economic growth.

Australian Shares

Australian shares rose 1.4% in June and 9.5% for the quarter. A steady domestic labour market, easing inflation and expectations for further RBA rate cuts underpinned the positive performance. The banking sector rallied strongly, helped by more global investors buying in and large super funds increasing bank share weightings to manage benchmark risks.

Emerging Markets

Emerging markets gained 4.1% (in AUD terms) in June and 6.5% for the quarter. South Korea and Taiwan performed strongly thanks to semiconductor stocks and favourable politics. Confidence improved on signs of stabilisation in China, lower global interest rates and a weaker USD.

Property and Infrastructure

Australian listed property rose 1.8% in June and 13.7% for the quarter, supported by the outlook for lower rates and steady property values. Global listed property and global infrastructure underperformed broader share markets, posting quarterly gains of 2.6% and 2.1% respectively.

Global Fixed Interest

Global bonds were volatile as worries over tariffs and US government debt pushed US Treasury yields higher and triggered swings in investor sentiment. The US 10-year yield finished June at 4.25%, while signs of falling inflation have strengthened expectations for rate cuts from the US Federal Reserve.

Australian Fixed Interest

Australian bonds gained 0.75% in June, with the Bloomberg Composite Index up 2.6% for the quarter. Declining inflation and subdued economic growth strengthened expectations for multiple RBA cuts through to early 2026.

Commodities

Oil prices spiked mid-June following Israel’s strikes on Iran but settled after a ceasefire. Brent crude approached US$80 per barrel before easing back. Gold rose 5.7% (USD terms) for the quarter, copper prices climbed on strong demand, while iron ore fell to US$94.5 a tonne on soft Chinese demand.

Currencies

The AUD strengthened to 65.8 cents against the USD by month-end, helped by a weaker USD and the view that it’s still trading below its fair value of around 70 cents.

Economic highlights

Geopolitical Tensions

Israel’s strikes on Iran, and Iran’s subsequent retaliation, drove a spike in oil prices in mid-June and rattled global markets over fears of disrupted supply through key shipping routes. However, fears eased after a ceasefire was announced 12 days later, stabilising oil prices and allowing them to resume their previous downtrend.

US Central Bank Policy

US Federal Reserve Chair Jerome Powell told Congress he’s still worried that tariffs could keep inflation higher. However, two other Fed members have taken a softer view, and there’s talk that President Trump may appoint a new Fed chair sooner than expected. This has led markets to expect US interest rates might come down sooner than previously thought.

RBA Outlook

Markets now expect the RBA to cut rates up to four more times, bringing the cash rate below 3.0% by early 2026. This is what many would consider the ‘neutral rate’, meaning interest rates would be set at a level that neither boosts nor restricts economic growth and inflation. Softer inflation and modest economic growth have strengthened the case for lower rates to help support spending and the broader Australian economy.

Australian Inflation Data 

Australia’s inflation continued to ease in May, with the headline CPI dropping to 2.1% and the key core measure (which strips out volatile items such as fuel and fresh food) falling to 2.4% — slightly below the middle of the RBA’s 2–3% target range.

Returns at a Glance

Asset class returns

Global sector returns

Australian sector returns

FY25 Year End Report on Ethos Portfolios.

The Ethos portfolios delivered strong results over FY25, with returns ranging from 8.65% for Ethos Defensive portfolio to 13.65% for Ethos High Growth.

We’re now more than five years into the Ethos journey. Over that time, the responsible investment landscape has evolved significantly—both in how it’s applied and how it’s perceived. While broader sentiment towards Responsible Investing has shifted at times, our approach has remained consistent: building responsible investment-focused portfolios underpinned by a disciplined research process and detailed manager selection process. On a purely financial measure, all Ethos portfolios remain well ahead of their respective cash-plus benchmarks since inception, clear evidence that a strong sustainability lens does not require compromising long-term returns or investment objectives (see Figure 1 below).

Looking specifically at FY25, returns were supported across both defensive and growth assets. Fixed income, both Australian and global, provided a stabilising anchor during periods of equity market volatility while continuing to deliver a steady income stream.

The strongest driver of performance came from our RI-focused equity managers, particularly within Australian shares, which benefited from a broadly risk‑on environment, despite navigating numerous challenges along the way (see figure 2). Our diversified approach ensured that portfolios were well‑positioned to capture market strength while avoiding overexposure to any single asset class.

Report published: 4 August 2025
Graphics and data courtesy of Zenith Investment Partners