Market Trends: September 2025

Major asset class performance

• Global equities continued to move higher in August, supported by continued good US earnings reports, the still-limited tariff effects on the US economy and a “dovish pivot” by the US Federal Reserve. US markets have moved to price in more Fed rate cuts over the coming year, lowering bond yields and the US dollar.  
• Australian equities also rose, helped by an RBA interest rate cut. The gain came despite a somewhat downbeat FY25 reporting season.    
• A modest decline in global bond yields, along with steady local bond yields, produced small positive gains in both global and Australian fixed-rate bonds in August.  
• Gold prices strengthened in August, helped by a weaker US dollar.    

Source: Bloomberg, Betashares. Cash: Bloomberg Australian Bank Bill Index; Australian Bonds: Bloomberg AusBond Composite Index; Global Bonds: Bloomberg Global Aggregate Bond Index ($A hedged); Gold: Spot Gold Price in $US; Australian Equities: S&P/ASX 200 Index; Global Equities: MSCI All-Country World Index in local currency and $A currency (unhedged) terms. Past performance is not indicative of future performance.  

Fixed-rate bond trends

• Local rate cut expectations held steady in August, with one rate cut expected by the end of 2025 and only one further rate cut in 2026. In the US, rate cut expectations increased, with two rate cuts expected by the end of 2025 and three further rate cuts over 2026. If right, this would see Australian and US policy rates aligned at around 3% by the end of next year. 
• Local 10-year bond yields were steady in August at 4.27% and remain in a narrow sideways range evident since early 2024. With broadly steady bond yields, local fixed-rate bonds have marginally beaten cash over the past six months.
  • The prospect of further rate cuts should lower bond yields and further boost bond returns relative to cash over the coming year. 
• Local credit spreads narrowed further, unwinding the small increase earlier this year during the equity market correction, resulting in the resumption of corporate bond outperformance relative to government bonds.
  • Easing economic risks bode well for a further narrowing in credit spreads, even though they are now relatively tight by historical standards.
• Local bonds have marginally beaten global bonds so far this year, after some underperformance in H2 2024. Overall, relative performance remains in a choppy sideways range and the outlook remains relatively neutral. 

Source: Bloomberg, Betashares. Australian bonds: Bloomberg AusBond Composite Bond Index; Global Bonds: Bloomberg Global Aggregate Bond Index ($A hedged). 

Global equity trends

• The MSCI All-World Price Index rose a further 2.0% in August – reaching a new end-month record high – after a solid 2.2% gain in July. The gain reflected a 1.1% rise in forward earnings and a 0.8% gain in the price-to-forward-earnings ratio to 19.0.
• Earnings expectations held steady again in August following downgrades earlier this year. Current earnings expectations remain consistent with a solid 16.6% growth in forward earnings projected by end-2026.
• With valuations still somewhat elevated, continued market gains are still possible, provided bond yields don’t rise much and/or the current bullish earnings outlook remains in place.  

Source: Bloomberg, LSEG, Betashares. Global Equities: MSCI All-Country World Index. Global Bonds: Bloomberg Global Aggregate Bond Index ($A hedged). You cannot invest directly in an index. Past performance is not an indicator of future performance.

• Among select Betashares global equity ETFs, global gold miners (MNRS) enjoyed a solid 19.4% gain in August, reflecting the ongoing strength in gold prices. Global banks (BNKS) and health care (DRUG) also enjoyed solid gains. The Nasdaq-100 (HNDQ) rose, but slightly underperformed during the month.   
• All up, the standout exposures so far this year remain global banks, gold miners and the Nasdaq-100.

Source: Bloomberg, LSEG, Betashares. Relative performance versus the MSCI All-Country World Index (local currency terms) for the indices which the relative ETFs track.  You cannot invest directly in an index. Past performance is not an indicator of future performance.

Australian dollar

• The Australian dollar rose in August, back to US65.4c, largely reflecting a 2.2% decline in the US dollar index. Iron ore prices were steady, while the 12-month forward expected cash rate differential to the United States narrowed to -0.2% from -0.4% due to an increase in US rate cut expectations.   
• The Australian dollar has generally been firm so far in 2025 despite a narrowing in short-term interest rate differential and easing iron ore prices. The main factor driving Australian dollar strength has been weakness in the US dollar – which in turn reflects Trump-related US economic uncertainty. 
• Reflecting an easing of global risks, more US rate cuts and its still-historically expensive level, the US dollar is expected to gradually weaken over the coming year which should support more Australian dollar strength.

Source: Bloomberg, LSEG, Betashares. Australian Equities: S&P/ASX 200 Index. Australian Bonds: Bloomberg AusBond Composite Index. You cannot invest directly in an index. Past performance is not an indicator of future performance.

Australian shares

• The S&P/ASX 200 price index lifted a further 2.6% in August after a  2.3% gain in July.
• Further earnings downgrades led to a small 0.3% decline in forward earnings in the month, though this was more than offset by a 2.9% gain in the price-to-forward-earnings ratio to 19.9.
• Australian equities are now trading just above global valuations, suggesting the market is quite expensive relative to history and only modestly more expensive than global equities.
• Current earnings expectations imply 8.4% growth in Australian forward earnings by the end of 2026, which is about half the expected growth in global earnings. What’s more, Australian earnings expectations remain under downward pressure. Accordingly, Australian equities still seem likely to underperform global equities over the coming year.  

Source: Bloomberg, LSEG, Betashares. Australian Equities: S&P/ASX 200 Index. Australian Bonds: Bloomberg AusBond Composite Index. You cannot invest directly in an index. Past performance is not an indicator of future performance.

• A modest rotation toward resources and away from financial stocks remained evident in August, with the former outperforming the latter, although both sectors produced positive returns.
• Among select Betashares Australian equity ETFs, standout performers in the month were resources (QRE) and small caps (SMLL) with gains of 10.1% and 13.8%. Financials (QFN) returned 3.8%.
• So far this year, technology (ATEC), financials (QFN) and quality (AQLT) have tended to perform the best. 

Source: Bloomberg, LSEG, Betashares. Relative performance versus the S&P/ASX 200 Index for the indices which the relative ETFs track.  You cannot invest directly in an index. Past performance is not an indicator of future performance.