Economic Overview
Q3 2025 was a very strong quarter for growth assets, with markets largely cheering the long-awaited first US rate cut of this cycle and another leg higher in the AI trade. Global sharemarkets delivered solid gains, emerging markets outpaced developed markets, and gold and other precious metals rallied sharply.
In the US, the Federal Reserve cut rates by 0.25% in September, taking the funds rate to 4.25%. The S&P 500 rose around 7.5% over the quarter and the Nasdaq did even better. Revised figures show annualised GDP growth close to 3.8% in Q2, supported by strong consumer spending.
Europe and the UK also delivered positive returns, though with a more mixed backdrop. Eurozone shares rose as inflation continued to moderate, while UK equities benefited from a weaker pound. Japan and emerging markets outperformed strongly, supported by governance reforms, semiconductor demand and improving trade sentiment.
Global fixed interest posted modest gains, while precious metals outperformed significantly.
Australia - The S&P/ASX 200 Accumulation Index gained 4.7% for the quarter, despite a softer September. Listed property produced strong results, continuing its recovery following earlier RBA rate cuts. Cash returns remained steady in line with the current cash-rate environment.
Inflation remains sticky, with headline CPI rising 1.3% in the quarter and 3.2% annually. Wage growth has levelled at around 3.4% annually. The labour market softened slightly, with unemployment reaching 4.5% in September before easing to 4.3% in October.
The RBA lowered the cash rate by 0.25% to 3.60% in July and left the rate unchanged at subsequent meetings in the quarter, managing the tension between inflation risks and a softening labour market.
Currency & Property - The Australian dollar strengthened modestly over the quarter, supported by firm commodity prices and a softer US dollar. This reduced the relative benefit of unhedged global equity exposure. National housing prices rose 0.4% over the quarter, driven by low listings, population growth and earlier rate cuts. Rental markets remain tight with strong rent growth.