Weekly recap
What happened in markets
The Australian sharemarket gained 0.6% last week, marking its second consecutive week of gains. However, investor sentiment remained cautious amid ongoing US tariff concerns and fresh political uncertainty after the date was set for the Australian Federal election. While the market held onto positive territory, gains were limited by speculation of a potential hung parliament as the latest polls pointed to a tightly contested election. The Australian Government released its Budget last week, revealing a larger-than-expected deficit, along with surprise tax cuts. The Financial sector was the standout performer last week, with Westpac rising 3.7% and NAB gaining 2.8%. The Energy sector also advanced 2.0% as oil prices rebounded from recent lows. However, the Information Technology sector struggled, falling 3.3%, weighing on overall market performance.
US sharemarkets declined last week, bringing the S&P 500 close to correction territory once again. Trade policy remained the dominant theme again this week, with anticipation building for the 2 April tariff announcement, with investors cautious to see the inflationary effects of the potential tariffs. Throughout the week, President Trump signed an executive order imposing tariffs on foreign-made cars, with rates set to rise from 2.5% to 25%, which is potentially set to increase the price of new cars. The Information Technology sector was the hardest hit last week, falling 3.2%, as Meta Platforms shed 3.3%, while NVIDIA Corporation dropped 6.8%. Elsewhere, the Communication Services sector also declined by 3.2%, while the Consumer Staples sector managed to buck the downward trend, up 1.7%, as investors sought defensive positions amid ongoing market volatility.
European sharemarkets were mixed last week, as the Euro STOXX 600 dropped 1.4%, while the UK FTSE 100 added 0.1%. President Trump’s 25% tariff on foreign-made vehicles and car parts raised fears of a trade war, with analysts projecting a €174 billion hit to European production. Lower-than-expected inflation in France and Spain reinforced expectations for an April European Central Bank rate cut, with markets pricing in an 80% probability of a 0.25% reduction. Geopolitical risks remained in focus, as Ukraine and Russia ceasefire talks advanced. Sector performance was mixed, with Utilities, Insurance, and Retail outperforming, while Automakers, Information Technology, and Industrials lagged.
Stock & sector movements
What caught our eye
The 2025 Australian Federal Budget has arrived with plenty of headline-grabbing promises and a mix of targeted incentives, all perfectly timed for the upcoming election on 3 May. Labor Treasurer Jim Chalmers is clearly pitching to voters feeling the pinch, offering direct tax relief, cheaper medicine and more affordable healthcare. Yet behind these enticing offers lies questions many are asking: is this sustainable, or just a short-term election sweetener? And, can Labor win another election based on cost-of-living promises?
Australian workers stand to benefit directly from personal income tax cuts, initially amounting to $5 per week next year, scaling up to $536 annually by mid-2027. While some have argued this to be anaemic, the tax relief is coupled with a continuation of electricity bill rebates, lower prescription medicine costs and increased incentives for bulk-billing GPs. One could argue, however, that more could be done if some harder choices were made elsewhere in the Budget. For example, restructuring social payments, tax reform or reducing spending on the now politically sensitive National Disability Insurance Scheme (NDIS).
Energy bills continue to be a tricky battleground. Politicians on both sides are promising cheaper power. History suggests voter scepticism is warranted. Australia’s ambitious energy shift, be it Labor’s renewables push or the Coalition’s nuclear option, comes with hefty costs. Promises of cheaper energy are familiar refrains, but they've rarely delivered in the past, leaving many Australians justifiably wary.
Then we turn to the elephant in the room, fiscal discipline. Economists are raising eyebrows at the government's optimistic projections, warning that high spending, especially on the NDIS, aged care, and ballooning interest payments on debt, may not be easily controlled. With spending expected to hit 27% of GDP next year, some experts caution that this Budget could spell trouble down the road, risking structural deficits and possibly even Australia's prized AAA credit rating.
Altogether, Australians heading to the polls are faced with a mixed bag. There appears to be a choice between short-term comfort and longer-term austerity. That choice may be more difficult for some than others, given elevated price levels and weak wages growth. Polling initially suggested a very tight race. More recently, it looks as though Labor has edged ahead. Notably, the winner may well only be able to form a minority government, meaning support from the increasingly powerful Greens and Independents will matter. Historically, the Greens have skewed toward support for Labor, while Independents vary and depend more on specific party policies.
The week ahead
Domestically, investors will gain an insight into consumers spending habits with the release of the latest Retail Sales, while the RBA will deliver its latest interest rate decision during the week.
Overseas, the Unemployment Rate will be released in Europe and the US, while Nationwide Housing Prices will be revealed in the UK.
Wade is the head of the Investment Services division at Cutcher & Neale and has over 10 years of industry experience in accounting and investment advisory roles.
Ryan is our Portfolio Manager, bringing over 15 years of experience in managing multi-asset investment portfolios with a specialisation in fundamental equity analysis.
