Farewell fiscal 2025, hello fiscal 2026

Farewell fiscal 2025, hello fiscal 2026

The Magnificent Seven; Alphabet (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Meta (NASDAQ:META), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA), which rose by an average 111 per cent over calendar 2023, continued its strong upward trajectory, increasing a further 63 per cent, on average, over calendar year 2024.

However, in the six months to June 2025, the market was more discerning, with an average increase of 9 per cent, and with three stocks retreating; Tesla – which performed negatively at -21 per cent, Apple – which saw an 18 per cent decline, and Alphabet – which declined by 7 per cent. In short, the average Magnificent Seven company has turned $1.00 into $3.76 in 30 months.

The Magnificent Seven now have a combined market capitalisation of A$27.3 trillion, or 8.5 times the entire market capitalisation of the Australian All Ordinaries Index (A$3.2 trillion), which comprises our top 500 companies.

Share markets mostly delivered investors a solid year of returns given the challenges from war, tariff announcements, slower economic growth, and increasing government indebtedness.

In the 12 months leading up to June 2025, the Australian All Ordinaries Index, excluding dividends, was up 9.5 per cent – a better than average year. The Hong Kong Hang Seng Index (which was up 35.8 per cent for the 12 months and up 20.0 per cent for the six months up to June 2025) and the German Dax 30 Index (up 31.1 per cent for the 12 months and up 20.1 per cent for the six months) should be highlighted. The U.S. S&P 500 was up 13.6 per cent for the year and 5.5 per cent for the 6 months, whilst the technology heavy Nasdaq put on 14.9 per cent for the year and 5.5 per cent for the 6 months.

The downward trajectory of the U.S. annual rate of inflation (which slowed to 2.4 per cent in the year to May 2024) saw the U.S. Federal Reserve cut the U.S. cash rate on three occasions, and by one whole percentage point, in the latter part of 2024 to the current 4.25 per cent to 4.50 per cent range. Whilst the U.S. Federal Reserve sat on its hands in the six months to June 2025, waiting to see how the tariff threat played out, the market is convinced the U.S. economy is slowing sufficiently and is looking for three more interest rate cuts of 0.25 per cent each, to 3.50 per cent to 3.75 per cent, by December 2025.

After breaching 5.0 per cent in October 2023, U.S. ten-year bonds declined to a 3.6 per cent yield by mid-September 2024. It then backed up to 4.57 per cent by December 2024, as the state of the U.S. Budget Deficit and overall Government indebtedness was front of mind. Over the six months to June 2025, U.S. ten-year bonds rallied 0.34 per cent to 4.23 per cent as higher inflationary expectations from tariffs subsided.  Meanwhile, the German ten-year bonds sold off to 2.60 per cent, whilst the Japanese ten-year bonds finished June 2025 at 1.43 per cent.

For the 12 months leading up to June 2025, gold rallied 42 per cent from US$2,337/oz to US$3,314/oz. And with the relatively weak Australian Dollar, the Aussie producers are enjoying the gold price which is around A$5,100/oz.

Bitcoin did even better than gold, jumping 73 per cent from US$61,900 to US$107,200 over the twelve months to June 2025.

With the Chinese residential property sector crisis, including many property developers having entered administration, it was unsurprising to see iron-ore declining to US$94.20/ tonne. With some new significant iron-ore projects coming on stream over the foreseeable future, it is possible the iron-ore price will come under further pressure, and the Australian Treasury is targeting US$77/tonne in fiscal 2026. 

Copper enjoyed a late rally to US$5.11/lb., up 27 per cent in the six months to June 2025.

How much of the rally in gold, Bitcoin, and copper is linked to the weakening U.S dollar?

Over the year to June 2025, the oil price declined by 20 per cent from US$81.46/bbl. to US$65.11/bbl.

On the currency front the Australian dollar finished the financial year at around US$0.65, but declined by at least 10 per cent to A$2.10 against the British Pound, and A$1.79 to the Euro.

After watching Australia’s stubbornly high inflation rate in 2024, Reserve Bank of Australia (RBA) Governor Michele Bullock, cut the cash rate by 0.25 per cent in February and May 2025 to 3.85 per cent. The market expects three more reductions of 0.25 per cent each, over the six months to December 2025, and this would take the RBA cash rate to 3.10 per cent.

The record domestic government expenditure as a percentage of GDP, the approximate three years of negative real GDP growth per capita, the abysmal productivity growth, the “Big Australia” policy pursued by both sides of politics, the consequent housing crisis and the extraordinary increase in energy prices continues to cause cost of living issues for many Australians. One bright spot for the Australian economy remains the relatively low 4.1 per cent unemployment rate.

Six month and 12 month returns to 30 June 2025

MORE BY DavidINVEST WITH MONTGOMERY

Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience.
David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.