Market & Portfolio Update – September 2025

Managed Account Summary

Over the three months to 31 August 2025, the managed accounts delivered solid returns, ranging from 3.35% to 6.27%. Equity markets advanced steadily, shrugging off geopolitical risks, trade uncertainty, and, in Australia, softer earnings results.

Looking across the portfolios, the key contributors for the quarter were:

Newmont Corp (NEM) returned 39.34% during the quarter as the gold producer released a stronger than expected Q2 financial result, with record free cashflow generation and higher than anticipated earnings.
Vanguard Global Value ETF (VVLU) returned 8.92% during the quarter as value stocks outperformed, driven by solid stock picking, a strong US reporting season and a continuation of the broad rotation out of growth and momentum stocks.

Outlook

The ASX 200 rose more than 7% over the past quarter, but earnings season told a different story. Company profits were downgraded by –1.2%, one of the weakest results since the GFC, and nearly half of all stocks swung more than 5% on results day. Much of the strength in share prices came from sentiment rather than real earnings growth, with many companies relying on cost-cutting instead of expanding revenues. Sectors like building materials, staples, and real estate struggled, while Coles and the platforms such as HUB24 held up by protecting margins.

The economy expanded 0.6% in Q2, lifting annual growth to 1.3%, the weakest since the early 1990s outside the pandemic. Growth came from household spending, up 0.9% with discretionary purchases rising 1.4%. Business investment stayed subdued, raising concerns over long-term momentum. Annual trimmed mean CPI was 2.7% in July, within target, while July employment showed strong full-time gains and record female participation. Consumer sentiment weakened mid-year before stabilising. Against this backdrop, the RBA cut the cash rate by 25 bps in August to 3.60%, its third move this year, with markets expecting another cut in November if inflation eases.

Global markets advanced strongly, with the U.S., Europe and Japan all posting gains. The S&P 500 hit fresh highs each month, led by technology and consumer discretionary stocks after robust earnings from firms including Nvidia, Microsoft and Alphabet. Confidence was supported by resilient growth, moderating inflation and expectations that central banks are near the end of tightening.

U.S. GDP grew 3.0% in Q2 and 3.3% annualised, supported by spending and investment. The July U.S. jobs report however showed clear signs of cooling, with just 73,000 jobs added, large downward revisions to prior months, and unemployment edging up to 4.2%. Gains were concentrated in healthcare, while cyclical sectors stalled. Inflation held steady at 2.7% headline, but core CPI rose to 3.1%, highlighting persistent stickiness. These softening U.S. economic data prints have seen additional downward pressure on the dollar. If the Federal Reserve accelerates rate cuts, lower yields could reduce foreign demand for U.S. assets and increase the risk of sustained dollar weakness.

Trade policy remained a key source of volatility. The U.S. secured agreements with China and flagged deals with Europe and India, while introducing a structured tariff system in July with levies of 10–50%. By August, the U.S.–China truce was extended 90 days, and tariffs on Indian exports rose over Russian oil purchases. These developments, combined with broader policy uncertainty, are driving a global geopolitical and fiscal realignment, influencing asset allocation. This has been illustrated in Europe and Asia which are increasing investment in energy, transport and defence to reduce reliance on U.S. trade flows and security guarantees.

Commodities reflected these trends. Oil spiked above USD 74 in June before easing, then rose again on OPEC+ limits and potential Russian sanctions. Gold peaked at USD 3,449, retreated, and later recovered on safe-haven demand, though higher real yields capped gains.

Looking ahead, central bank policy remains the key driver. In Australia, one more RBA cut is expected by November, conditional on inflation easing. In the U.S., the Fed appears positioned to lower rates before year-end, with September under active consideration. Trade and geopolitics will remain volatile, but underlying growth and resilient earnings provide support, leaving diversified portfolios well placed to manage risk while capturing opportunities.

Putting it Together – Forward Strategy and Positioning

Recent market moves have reflected shifting perceptions of policy rather than fundamentals, creating near-term volatility but also clarifying the landscape for investors. As we move through the second half of the year, clearer macro themes are emerging. In the US, tariff-driven economic restructuring may temporarily lift inflation and unemployment, yet ongoing fiscal stimulus provides a strong cushion for growth and corporate earnings. At the same time, strengthening global growth is opening up attractive opportunities in international markets, with a softer US dollar further enhancing diversification benefits. In Australia, though Australian equities may lag due to high valuations and weak household spending, domestic bonds are well positioned due to a stronger fiscal outlook and a more dovish RBA.

Portfolio Changes

Volatility in Australian equities remains elevated, with tracking error (deviation to benchmarks) at the top of our range. We have exited several positions across the managed accounts including Goodman Group, Xero, Qantas, Hub24, Breville and Qube these changes reduce exposure to idiosyncratic swings and stretched valuations. Across the risk levels, we have added new positions in Resmed, Newmont, Technology One, Stockland and Orica. These changes enhance the defensive qualities and sector balance, helping bring portfolio risk back in line with the benchmark.

We have also made modest reallocations across other holdings to fine-tune exposures.

DISCLAIMER:
The contents of this publication are only intended to provide a summary and general overview of matters of interest in the financial markets and in the economy and are distributed in order to promote broad discussion. The publication does not constitute investment or financial product advice, it does not constitute an offer or invitation to purchase a financial product or financial service, nor does it of itself create a client-financial adviser relationship. To the extent that any part of the contents of this publication may be said to constitute “general advice” we warn you not to act on any matter referred to in this publication without first seeking qualified financial product advice appropriate to your particular circumstances, needs and objectives before acting or relying on any content in this publication. TWD Licensee Services Pty Ltd (ABN 88 605 064 480 – AFSL 475964) makes no warranties or representations about the accuracy or completeness of the content of this publication, and excludes, to the maximum extent permissible by law, any liability which may arise as a result of the use of the content of this publication.