3 minute read
Investment Market Insights
BY RICHARD NICHOLAS & STUART DEAR, PEAK INVESTMENT PARTNERS
Peak Investment Partners is a Sydney-based boutique asset management firm that has been helping not-for-profits achieve their investment goals for nearly 20 years.
The Australian market has been particularly volatile, with a 16% range over the reporting season. Gold has stood out as a strong performer. The 10-year chart on the following page to March 8, 2025, demonstrates that the All Ords has delivered solid long-term returns. (Source: Iress).
The US market has fluctuated within a 10% range, with the Nasdaq — dominated by technology stocks — experiencing a 15% swing.
The “Magnificent Seven” tech leaders (Apple, Google, Microsoft, Meta, Amazon, Nvidia, Tesla) initially rose 13% post-election but have since dropped 15%.
Impact of Trump Policies
US markets have welcomed Trump’s policies — lower corporate taxes, deregulation, and cheaper energy — which may curb inflation and government spending. However, tariff policies are less favourable, as they function as a tax on goods and can undermine global confidence. Markets are gradually adjusting to Trump’s negotiating approach, making it crucial to focus on long-term implications rather than short-term headlines.
Long-Term Market Performance
Over 20 years to June 30, 2024, the ASX 200 (including dividends) returned 8.6% per annum, while the MSCI Global Index (excluding Australia) returned 8.4% per annum. Over the past decade, global returns surged to 13.1% annually, driven by US tech stocks. Notably, markets have only recorded four negative years in the past 20 (a 1:5 ratio) and have always rebounded, reinforcing the long-term case for equities investment (Source: Vanguard).
Interest Rates, Market Earnings & Valuations
On March 3, 2025, Australian interest rate futures suggested a decline from 4.05% to around 3.5% by December 2025, stabilizing through the first half of 2026 (Source: FactSet).
Stock prices tend to align with earnings over time, making earnings growth and valuation critical. The Australian market is pricing in approximately 5% earnings growth for 2025, with higher expectations for 2026, at a 2025 price-toearnings ratio (PER) of 17x (historical average: 14.8x) (Source: Macquarie). Given Australia’s low productivity and high costs, international investments may be more attractive long-term — though franking credits and a weaker A$ (down nearly 20% since 2021) remain advantages.
In contrast, the US market — where tech comprises 30% — anticipates 10-15% earnings growth in 2025 at a PER of 22x (historical average: 17x). This valuation appears reasonable if earnings growth remains strong. European and emerging markets offer appealing opportunities due to cheaper valuations.
Markets are gradually adjusting to Trump’s negotiating approach.
Seasonality Strategy
As we approach the end of the historically strong November-April period, caution is warranted. The upcoming Australian election is unlikely to significantly impact markets.
