Investment update - February 2025

In February 2025, markets experienced increased volatility due to concerns over slowing US growth, higher than expected inflation, and uncertainty surrounding US trade policies. The US imposed tariffs on Canada, Mexico, and China, leading to fears of rising inflation and weaker global trade. The S&P 500 fell 1.4%, driven by a sell-off in the tech sector, while the Australian S&P/ASX 200 fell 3.8%. Bond yields declined, supporting positive fixed income returns, while US economic data indicated moderating growth and persistent inflation, with unemployment rising slightly to 4.1%.

In Australia, the Reserve Bank lowered the cash rate by 0.25% to 4.10%, signalling cautious easing. GDP growth was 0.6% in the December 2024 quarter, and unemployment edged up to 4.1% in January. Business confidence improved, but consumer sentiment remained weak due to cost-of-living concerns. National home values increased slightly, reflecting monetary policy shifts.

Globally, central banks adjusted policies in response to economic conditions. The European Central Bank cut rates as inflation eased, while the Bank of England adopted a gradual easing approach. At the National People’s Congress in early March, China announced it would maintain its 5% growth target and introduced stimulus measures, despite facing tariffs imposed by the US. In response, China retaliated with tariffs of its own. Increased defence spending in Europe is expected to boost economic activity, though trade policy uncertainty remains a key risk.

Read the full report