Markets – August 2025
The Australian share market continued its upward momentum in July, with the ASX 200 Index rising by 2.3%, marking a historic high.
The All Ordinaries also broke through the 9,000-point milestone, reflecting strong investor confidence and global economic optimism. This rally was driven by several key factors:
- Global trade optimism, particularly following the US-Japan and Europe trade deals;
- Ongoing continued resilience in US economic data;
- Easing inflation expectations and lower interest rate outlooks; and
- Anticipation of rate cuts this month by the Reserve Bank of Australia (RBA), supported by slowing inflation – with the CPI now at 2.1%, well within the RBA’s target range.
2024-2025
The Tech sector continues as an investor favourite
The Information Technology sector was a key contributor over the month.
Continued demand for digital solutions and AI-driven efficiencies helped lift stocks like WiseTech Global and Xero, despite broader concerns about high valuations. WiseTech shares increased by 9.5% over July.
Data centres continue to be popular. Infratil is one of the largest data centre operators in Australia, with its shares jumping by 9.3% over July.
Infratil is the largest shareholder of CDC, the biggest privately owned and operated data centre business across Australia and New Zealand. The Future Fund is also a major investor in CDC.
The value in the energy sector is finally being recognised
July saw a notable rebound in Australian energy stocks, with Woodside up 12.5% and Santos up 2.7%.
Santos recently received an A$8.89 takeover proposal from a consortium led by a subsidiary of the Abu Dhabi National Oil Company and US Investment Bank, Carlyle. The consortium is currently going through a due diligence process, and should the offer proceed, a transaction is expected in 2026 after all regulatory approvals are obtained.
A return of buyers in the office sector is supportive of A-REITs
The lowering of interest rates has also been supportive for listed real estate trusts, with the broad Australian-REIT Index up 3.2%. Standout performers were GPT +5.4% and Dexus +6.3%, as investors were enticed by attractive yields and the return of buyers to the sector, particularly the office sector.
Ongoing global growth and stimulus measures in China support commodities
The Materials sector also benefited from supportive commodity prices and a rotation out of financials into commodity stocks. BHP was up 6.8% over the month.
All eyes are on the current reporting season, and the lookout for earnings growth
July’s rally was once again largely driven by multiple expansion rather than earnings growth, with the ASX 200’s forward P/E ratio now exceeding 19 times, which is above historical averages of around 14 to 15.
While investor optimism remains high, analysts caution that elevated valuations and global uncertainties—such as delayed US tariffs and geopolitical risks—could pose challenges in the months ahead.
Week one of the reporting season, 14 stocks have announced their results.
Out of the 14 stocks that reported their earnings, five stocks beat their estimates, five met their estimates, and four stocks fell short. This provided a beat/miss ratio of 1.25.
The notable beat was ResMed, where its gross margin increased to 61%. The company doubled its share buyback program.
The notable miss was Rio Tinto, where questions are being asked about its slightly disappointing iron ore production and the company’s recent big bet on lithium.
Signs of excess speculation are evident. This is not a time to be all in on equities
There are definite signs in the market that risks are elevated. Share markets are trading at record highs; PE ratios are at levels well above historical averages; there are high levels of retail investor participation in the share market; meme stocks are back in the headlines; and crypto assets are once again the flavour of the month.
These are indications that investors should be careful with their allocations by trimming back any speculative exposures; taking profits on gains where possible; reducing large overweights to individual stocks; and by retaining quality investments in the portfolio.
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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