Market Update - Month Overview (December 2025)

Summarised by Shara Cox (Report via Zenith)

International Markets Summary

International share markets finished 2025 on a strong footing, with developed markets delivering solid full-year returns despite some volatility late in the year. European equities were the standout performers, supported by fiscal easing, infrastructure spending and resilient bank earnings, while Japanese shares benefited from pro-growth policies and a weak yen. US equities recovered from earlier tariff-related uncertainty and ended the year higher, underpinned by strong consumer spending and robust economic growth, even as expectations for future rate cuts were pared back. Emerging markets had their strongest year since 2017, driven by falling inflation, global rate cuts and powerful tailwinds from artificial intelligence, particularly in North Asia where semiconductor demand surged. Across asset classes, global bonds delivered positive returns as central banks shifted toward easier policy, while commodities were mixed, with gold and copper posting strong gains on policy uncertainty and structural demand, offset by weakness in oil due to excess supply. Currency movements also played a key role, with a sharp decline in the US dollar boosting returns for unhedged international assets.

Australian Markets Summary

Australian markets rose in December but lagged international peers over the year, reflecting a more challenging domestic backdrop. Local equities were supported by strength in banks and resource stocks, with higher-than-expected iron ore prices and strong gains in gold and copper benefiting major miners. However, overall market performance was weighed down by weaker earnings growth and a sharp shift in interest rate expectations, as persistent inflation forced markets to move from forecasting rate cuts to pricing in possible rate hikes by early 2027. This change in outlook particularly hurt growth-oriented sectors, with healthcare and technology among the weakest performers, highlighted by a significant decline in CSL over the year. Australian bond markets also reflected these inflation pressures, with long-term yields rising as economic growth showed signs of improvement and inflation remained above the RBA’s target band. While listed property ended the year higher and valuations appear to be stabilising, returns were not strong enough to drive a broad rotation away from equities. Overall, Australian markets remained supported by commodities and financials but faced headwinds from inflation, interest rate uncertainty and subdued earnings momentum.