Snapshot
Global sharemarkets paused in February, with uncertainty around President Trump’s tariff policies adding to concerns about global growth. The US, Australian, and Japanese markets led the weakness, while European, Chinese, and Hong Kong markets posted gains, highlighting the divergence between regions.
In the US, market performance varied significantly, reinforcing the benefits of diversification in an international share portfolio. Large-cap stocks in the S&P 500 outperformed technology-heavy indices, including the Magnificent 7, as well as small and mid-cap companies.
Bond yields fell considerably amid tariff-related uncertainty, with the US 10-Year Treasury yield dropping from 4.55% to 4.19% during the month, after peaking at 4.79% in January. This decline was notable as it eased concerns over rising borrowing costs for both the US Government and mortgage holders.
The political landscape in Washington remained a key focus, as Trump’s protectionist stance intensified. February saw fresh tariff announcements on steel and aluminium, reciprocal tariffs, and the possibility of new tariffs on semiconductors, pharmaceuticals, and automobiles.
Trump’s trade negotiation strategy so far appears to have three key elements. First, he uses tariffs to reduce the flow of fentanyl and illegal migration into the US. Second, he aims to reduce the US trade deficit. Third, he seeks to bring manufacturing home and promote US exports.
Closer to home, the Reserve Bank of Australia (RBA) cut interest rates for the first time since November 2020, lowering the cash rate by 0.25% to 4.10%. The decision followed a sharper-than-expected decline in inflation, giving the Board confidence to ease policy.
The big four banks are constructive on further rate cuts, projecting the cash rate could settle between 3.10% and 3.85% by late 2025. Given the RBA’s cautious stance on further policy easing however, we expect the next potential rate cut of 0.25% could come at the 19-20 May meeting, following the release of quarterly inflation data on 30 April.
Looking ahead, we remain cautiously optimistic for 2025, albeit with potential for increased volatility. Inflation has stabilised at more acceptable levels, and central banks are expected to maintain or ease monetary policy. This environment should support global economic growth and corporate earnings, providing favourable conditions for markets in the year ahead.
Key Stocks
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.
