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, but at a slower pace. It is now stabilising within the RBA’s target range of 2–3%. The non-seasonally adjusted year-ended figure for March 2025 came in at 2.4%. The trimmed mean landed at 2.9%.
Interest Rates
Inflation has now fallen into the target range. The first rate cut is already underway. Investors are now asking whether more cuts will follow. The cash rate currently sits at 4.10%, following the 25 basis point cut in February. CBA predicts the cash rate will drop to 3.35% by year end. ANZ expects that rate to arrive sooner — by August.
Equity Market
The S&P/ASX 200 Index closed at 8,238 points on 1 May 2025. This reflects a rebounding rally following the Liberation Day sell-off. Tech and property stocks led the recovery.
Economic Performance
KPMG predicts 1.8% real GDP growth for Australia in 2025. Vanguard forecasts growth of around 2% by year end. Both predictions assume Chinese policymakers will boost domestic demand through infrastructure investment. This would increase China’s need for Australian commodities.
Australia has also emerged from a GDP per capita recession. GDP per capita grew by 0.1% in Q1 2025. Household spending contributed, rebounding by 0.4%.
Labour Market
The ABS released unemployment data in March showing the rate at 4.0%. The participation rate climbed to a record high of 67.1%. Rising living costs are encouraging more individuals to enter the workforce.
Currency Strength
The Australian dollar is trading at approximately 0.65 USD as of 5 May 2025. Labor’s election victory and a weakening US dollar have supported the AUD.
Labor Party Wins the 2025 Australian Federal Election
Labor won a historic landslide victory on 3 May 2025. The party secured at least 86 seats — one of its strongest results in decades. Opposition Leader Peter Dutton lost his Queensland seat of Dickson to Labor’s Ali France. This marks the first time an opposition leader has lost their own seat in Australian history.
Greens leader Adam Bandt also conceded defeat in Melbourne after 15 years. Labor’s Sarah Witty won the seat on an 8.6% swing, aided by preference flows from One Nation and Liberal voters.
Labor’s key policies resonated with voters. These included a 20% reduction in HECS-HELP debts — around $5,000 per student. Labor also expanded the First Home Guarantee scheme. All first home buyers can now purchase with a 5% deposit, with no income caps or lender’s mortgage insurance.
US Market
Stock Market Performance
US markets rebounded strongly across mid to late April and into May 2025. The Dow Jones rose 8.83%. The S&P 500 gained 1.47% and the Nasdaq rose 1.51%. Better-than-expected employment data drove the rally, despite recently introduced tariffs.
Federal Reserve Policy
On 7 May 2025, the Federal Reserve held the federal funds rate at 4.25%–4.50%. This was the third consecutive meeting without a change. The Fed cited persistent inflation and uncertainty from ongoing trade tensions.
Economic Performance
US real GDP contracted at an annual rate of 0.3% in Q1 2025. Government spending cuts contributed to the decline. Businesses also fast-tracked imports to avoid new tariffs. Looking ahead, Goldman Sachs has revised its 2025 GDP growth forecast down to 1.7%, from an earlier estimate of 2.2%.
European Market
Economic Growth
The Eurozone grew by 0.4% quarter-on-quarter in Q1 2025. This beat the forecasted 0.2%. Ireland led with 3.2% growth. Spain added 0.6%. Germany and France showed more modest results at 0.2% and 0.1% respectively. However, the outlook remains cautious. The ECB has revised its 2025 annual GDP growth forecast down to 0.9%.
Inflation and Monetary Policy
On 8 May 2025, the Bank of England cut its base rate by 0.25 percentage points to 4.25%. This was its fourth cut since August 2024. The decision passed by a narrow 5–4 vote. The cut aims to support the UK economy amid easing inflation and global trade uncertainty.
International Developments
The EU is exploring ways to strengthen the Euro as a global reserve currency. Confidence in the US dollar has weakened due to erratic trade policy. The EU is considering issuing common debt and expanding euro-denominated instruments.
Meanwhile, OPEC+ has announced plans to accelerate oil output. The group may add up to 2.2 million barrels per day by November 2025. Saudi Arabia is leading the push to penalise members exceeding production quotas. As a result, US benchmark crude has fallen to $56.08 per barrel.
General Advice Warning
This information is general in nature only. It does not consider your personal objectives, financial situation or needs. Nothing here constitutes financial, investment or legal advice. Before acting, consider whether this information suits your circumstances. To the maximum extent permitted by law, Forward Path Advisory Pty Ltd, Joel Cleary and Radz Je disclaim all liability for any loss arising from reliance on this content. Past performance is not an indicator of future performance. Please seek professional advice before making any financial decisions.
How We Can Help
Navigating today’s markets requires informed decisions. At Forward Path Advisory, we help you understand how market trends affect your financial situation and investment strategy. Contact our team today for tailored advice aligned to your long-term goals.
