Equity Market Update – May 2025
We would like to provide you with an update on recent market developments that may have an impact on your investments.
Market update as of May 2025
Australian Market
Inflation
The consumer price index is falling at a slower pace, stabilising itself in the RBA’s target range of 2-3%. The non-seasonally adjusted year-ended percentage change for March 2025 came in at 2.4% while the trimmed mean came in at 2.9%.
Interest Rates
Given that inflation has fallen into the target range, and the first rate cut is already underway, investors wonder whether more rate cuts are to come. The cash rate target currently sits at 4.10% following the 25 basis point cut in February. CBA predicts that the cash rate will drop to 3.35% by the end of the year, while ANZ predicts that the cuts will come earlier with a rate of 3.35% being in force by August.
Equity Market
The Australian equity market, as measured by the S&P/ASX 200 Index, closed at 8,238 points on the 1st of May 2025. This value reflects the rebounding rally from the decline in the S&P/ASX 200 following the impacts of Donald Trump’s liberation day. The rally comes thanks to a bounce in tech and property stocks.
Economic Performance
KPMG is predicting 1.8% in Real GDP growth for Australia over 2025 and Vanguard states that growth will be around 2% for the year-end 2025. The prediction is of the basis that Chinese policymakers will look to boost domestic demand following trade challenges with the US through infrastructure investment thus boosting their need for Australian commodities. Despite low growth predictions, Australia has emerged from a
GDP per capita recession, with a 0.1% increase in GDP per capita for Q1 2025. This partially was due to a rebound in household spending which rebounded by 0.4%.
Labour Market
The latest unemployment data release in March by the ABS shows the unemployment rate at 4.0%. However, the participation rate climbed to 67.1% representing a record high. This gain can be attributed to the pressures of rising living costs, which have encouraged individuals to enter the labour force.
Currency Strength
The Australian dollar (AUD) is trading at approximately 0.65 USD as of May 5, 2025, capitalising on the Labor governments victory and a weakening US dollar amid trade uncertainty.
The Labor party smashes expectations at the 2025 Australian Federal election
In the 2025 Australian federal election held on May 3, the Labor Party, led by Prime Minister Anthony Albanese, achieved a historic landslide victory, securing at least 86 seats and potentially up to 90, marking one of its strongest performances in decades. This triumph was underscored by significant upsets, including Opposition Leader Peter Dutton losing his Queensland seat of Dickson to Labor’s Ali France, a first in Australian history where an opposition leader was unseated in their own electorate. Additionally, Greens leader Adam Bandt conceded defeat in Melbourne after a 15-year tenure, with Labor’s Sarah Witty winning the seat amid an 8.6% swing, influenced by preference flows from One Nation and Liberal voters.
Labor’s campaign resonated with voters through key policies such as a 20% reduction in all HECS-HELP debts, a $5,000 decrease per student, and an expansion of the First Home Guarantee scheme, allowing all first home buyers to purchase properties with a 5% deposit without income caps or lender’s mortgage insurance.
US Market
Stock Market Performance
Over mid to late April and the beginning of May 2025, U.S. stock markets experienced rebounds across major indices. The Dow Jones Industrial Average rose by 8.83%, the S&P 500 rose by 1.47% and the Nasdaq Composite rose by 1.51%, marking a bounce back from the recent decline. The rally follows better-than-expected employment data given the recently established tariffs.
Federal Reserve Policy
On May 7, 2025, the Federal Reserve maintained the federal funds target range at 4.25% to 4.50% for the third consecutive meeting, citing persistent inflation and heightened economic uncertainty due to ongoing trade tensions and tariffs.
Economic Performance
Real GDP growth decreased at an annual rate of 0.3% in the first quarter of 2025. The decline in Real GDP was partially influenced by the cut in government spending.
Additionally, imports surged as businesses fast-tracked purchases to avoid impeding tariffs introduced by the Trump administration. Looking ahead, forecasts suggest continued challenges. Goldman Sachs has revised its 2025 GDP growth projection down to 1.7% from an earlier estimate of 2.2%.
European Market
Economic Growth
The Eurozone economy expanded by 0.4% quarter-on-quarter in Q1 2025, surpassing the forecasted 0.2% growth. This acceleration was driven by strong performances in countries like Ireland (3.2%) and Spain (0.6%), while Germany (0.2%) and France (0.1%) showed more modest growth. However, the outlook for the remainder of 2025 is cautious, with the European Central Bank projecting annual GDP growth of 0.9%, revised down from earlier estimates due to escalating trade tensions with the U.S.
Inflation and Monetary Policy
On May 8, 2025, the Bank of England reduced its base interest rate by 0.25 percentage points to 4.25%, marking its fourth cut since August 2024 and the second this year. This decision, aimed at supporting the UK economy amid easing inflation and global trade uncertainties, was made by a narrow 5–4 vote within the Monetary Policy Committee.
International Developments
Euro’s Potential Rise as Global Reserve Currency
The European Union is exploring measures to strengthen the Euro’s role as a global reserve currency. Amid declining confidence in the U.S. dollar due to erratic trade policies, the EU is considering issuing common debt and expanding euro-denominated financial instruments to enhance the euro’s international standing.
OPEC+ Increases Oil Production
OPEC+ has announced plans to accelerate oil output, potentially adding up to 2.2 million barrels per day by November 2025. This decision, led by Saudi Arabia, aims to penalise member countries that have exceeded production quotas. The increased supply has contributed to a drop in oil prices, with U.S. benchmark crude falling to $56.08 per barrel.
Advice Warnings & Disclaimers.
This information is intended to provide general information only and has been prepared without considering any particular person’s objectives, financial situation or needs. Any general advice contained within or given during this presentation (whether orally or in writing) does not consider your objectives, financial situation or needs. Nothing in this presentation is intended to be investment, financial advice or a recommendation to invest in a financial product. Before acting on such information, you should consider the appropriateness of the information having regard to your personal objectives, financial situation or needs. To the maximum extent permitted by law, we (Forward Path Advisory Pty Ltd), Joel Cleary & Rathakrishna Jeyabalasingam (Radz Je) disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered as a result of relying on anything in this podcast, including any forward-looking statements. Past performance is not an indication of future performance. In particular, you should obtain professional advice before acting on the information contained in this presentation.
Navigating Australia’s evolving property market requires informed financial decisions. At Forward Path Advisory, we can help you understand how these market trends affect your personal financial situation and investment strategy. Whether you’re considering buying, selling, or investing in this delicately balanced market, contact our team today for tailored advice that aligns with your long-term financial goals.
