Trade policy dominated headlines in 2025
Trade policy had the effect of unsettling global markets. Early in the year, the US introduced ‘Liberation Day’ tariffs on major trading partners, triggering fears of slower growth and higher prices.
Share markets fell sharply in April, although by midyear enough agreements had been reached to steady markets. The effects spread across other markets as well. The US dollar, normally a safehaven currency, lost strength as investors questioned its resilience, prompting a shift into gold and sending gold prices sharply higher.
Globally, inflation stayed low
This allowed most major central banks to cut interest rates to support growth. It was positive for markets despite ongoing trade and geopolitical uncertainty. Short term borrowing costs fell, but long term interest rates drifted higher amid concerns about rising government debt in the US, UK and Japan.
Australia followed a different path. After three rate cuts in 2025, the Reserve Bank of Australia reacted to ongoing inflation with a rate rise of 0.25% on 3 February 2026.
Global economic growth exceeded expectations
Strong consumer spending and solid job markets in major economies helped offset worries about tariffs and political risks. In Australia, household demand strengthened and unemployment stayed low. Global share markets performed well, particularly in the US and Europe, where strong corporate earnings supported optimism.
Geopolitical and debt concerns also shaped markets
Conflict in the Middle East pushed oil prices higher, though hopes of progress in Russia-Ukraine talks later eased energy costs. Political uncertainty in Europe and persistent concerns around government debt reminded investors that fiscal and geopolitical risks remain central to global market sentiment.
Technology driving markets
Fuelled by enthusiasm around artificial intelligence (AI), breakthroughs early in the year lifted tech stocks strongly, but growing competition and talk of an ‘AI bubble’ later raised questions about whether valuations had run too far.
Even with solid profit results, investors became more cautious, concerned about high prices, dependency across the tech ecosystem and whether future earnings could meet ambitious expectations.
Outlook for 2026
Geopolitics
Midterm elections in the US and President Trump’s appointment of a new Federal Reserve Chair could influence markets, especially if the new Chair adopts a more ‘dovish’ stance that risks fuelling inflation.
In Australia, government spending is expected to continue as private sector momentum gradually builds. Globally, tensions persist: Russia-Ukraine ceasefire talks remain unresolved, incidents in the South China Sea continue, and Middle East risks remain. Sudden political or trade shocks could still trigger volatility.
Interest rates
The US is expected to continue cutting rates as inflation cools, supporting growth. In Australia, the Reserve Bank has warned inflation is still too high, and reacted with a rate rise of 0.25% on 3 February 2026.
Technology
Artificial Intelligence (AI) will remain a major force for productivity and innovation, but investors are asking whether earnings can justify valuations and which companies are best placed to deliver sustainable profitability.
Our exposure to technology has delivered strong returns for members, with the Magnificent 7 and private market investments, such as data centres, boosting performance.
