Quarterly Market Report – Quarter Ending 31 December 2025
Market Update
| January 29, 2026
Isolated Market Experience
Understanding Growth Disparity
The final quarter of 2025 closed out a year in which Australian investors experienced a notably different market environment to their global peers. While major international share markets delivered strong gains – particularly international shares (hedged), which finished the year in the high teens – the domestic ASX 200 rose by around 10%. This gap between Australian and global performance was a defining feature throughout the year and remained evident in the December quarter.
Reserve Differences
A key influence on the local market was the Reserve Bank of Australia’s increasingly cautious stance. In contrast to the U.S. Federal Reserve and several other global central banks that commenced interest-rate cuts, the RBA held the cash rate steady at 3.60% for the entire quarter. Persistently sticky domestic inflation and a more resilient-than-expected economy supported the RBA’s decision to wait. This divergence in policy placed pressure on rate‑sensitive areas of the ASX – most notably banks and property, while resource companies benefited from firm commodity prices and continued strength in gold.
Explaining Divergence
Australia’s comparatively modest market performance also reflected its market structure. The ASX remains heavily weighted towards banks and resources and has only limited exposure to the high‑growth technology sector that fuelled much of the global rally. The surge in artificial intelligence investment continued to drive international tech stocks higher, though questions emerged about whether record levels of capital expenditure would ultimately convert into meaningful earnings. At the same time, gold’s strong run highlighted growing investor concern about fiscal sustainability across major global economies.
Looking ahead to 2026, Australian investors face a number of important considerations. The key question is whether the local market’s underperformance stems from temporary economic headwinds or reflects more structural challenges tied to market composition. The RBA’s differing trajectory from other central banks, ongoing cost‑of‑living pressures, and the technology‑led nature of global market leadership will all play a role in shaping portfolio positioning in the year ahead.
