Markets – November 2025
Another month of strong returns – Australia underperforms
Global share markets continue to perform well, with all major markets providing positive returns over October.
Worth noting was the relative underperformance of the Australian share market, which has now returned 4% for the financial year to date, compared with nearly 8% for the Dow Jones and double-digit returns for most other major markets.
2025-2026
So why is the Australian share market underperforming?
The answer to this question is centred around a combination of factors that are unique to the Australian market:
Australia has less exposure to high growth tech stocks
Our market is heavily weighted towards the barbell of financials and resources, with limited exposure to technology. In the ASX 200 index about 4% is tech related, compared to around 35% for the S&P 500 index.
Global markets, especially the US, have been driven by tech stocks, particularly the ‘Magnificent Seven’ (Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia and Telsa).
Recently the ‘Magnificent Seven’ have been replaced with a new grouping of tech stocks called the ‘AI 8’ – those investing heavily in the AI thematic, which include Nvidia, Microsoft, Alphabet, Amazon, Meta, Broadcom, Oracle and Palantir.
Commodity price weakness
Earnings from the resources sector have been going backwards over the last couple of years due to falling commodity prices, particularly iron ore, lithium, oil, LNG and nickel.
This has been a major drag on earnings for most stocks in the sector – a significant component of the ASX.
High valuations in the banking sector
After strong gains over the previous financial year, valuations in the banking sector have become stretched and this has seen investors rotate out of high valuation stocks into better value opportunities.
This week, the CBA share price fell nearly 7% following an update that its margins were softer and expenses were higher than what analysts were expecting.
Interest rate sensitivity
Following higher than expected inflation numbers in Australia, the RBA has delayed ongoing interest rate cuts, with the majority of economists now expecting the next cut likely to be delayed until later in 2026.
This week’s surge in consumer sentiment to its highest level since December 2021 reinforces the view that rates will remain on hold for now.
This contrasts with other central banks, which are continuing to ease their rates. The US central bank, the Fed, is expected to cut rates next month.
Underperformance can be a blessing and a curse
This same scenario was evident entering the dot-com bubble in the late 1990s. The Australian economy was considered old-school and lacking tech entrepreneurship and opportunities.
The ASX was (and still is) dominated by financials, mining, and industrials, with very few large-cap technology companies. Unlike the U.S. Nasdaq index, which was flooded with internet startups and tech giants, Australia had minimal representation in the dot-com space.
Many of our top ASX stocks underperformed during the dot-com boom, as investors rotated to the speculation and investment frenzy in the global tech sector.
Following the dot-com crash in the early 2000s, the Australian share market went through a correction that was shorter than most other major markets, especially the US market. The ASX 200 declined by roughly 10–15%, compared to the Nasdaq’s ~75% plunge.
Investors were attracted to our market as it was considered a conservative investment culture, with less exposure to speculative tech IPOs, which meant fewer losses during the crash.
After bottoming out in 2002, the Australian share market entered a strong period of market returns, supported by:
- a robust banking sector, which remained profitable and stable
- a commodities boom, driven by Chinese demand
- low interest rates and solid domestic economic growth, and
- blue-chip companies that continued generating profits and paying out higher dividends.
Today, our top twenty stocks typically make up around 55% of the ASX200 index and include BHP, CSL, the top four banks and Macquarie, Telstra, Woolworths and Woodside.
Whilst we can’t guarantee China will continue to hoover up all our commodity exports, support for investor returns over the medium to long-term will come from: our growing population; low government debt (compared to our trading partners); strong banking sector balance sheets; profitable duopolies in many core sectors; and an innovative industrial sector.
Please don’t hesitate to contact me should you have any questions.
Kauri Wealth Management is a Fee for Service investment advisory business and as such my advice is built around ongoing personal relationships with my client base. Personalised independent advice is backed up by a breadth of industry knowledge.
I accept a limited number of new clients each year and would be happy to discuss this further with you. Please don’t hesitate to contact me.
Russell Lees
Senior Adviser
Phone: +61 439 852 963
Email: russell@kauriwealth.com.au
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