December 2025 Client Investment Update

from Neil Kendall - Managing Director of Tupicoffs, The Independent Financial Planners

Welcome to our end-of-year Client Update for 2025.

It’s been another successful year, although one made up of some mixed results. We’ve seen very strong returns in the United States, with markets delivering around 13.5% over the last 12 months. Germany, while relatively quiet on the news front, has achieved returns of over 19% over the same period. By contrast, the Australian share market has been more subdued, rising just over 3% for the past year.

We have also seen strong residential property returns in Brisbane, with prices increasing by around 12% along with solid rental growth. That’s great news for property owners, but understandably more challenging for those trying to buy into the Brisbane market.

Over the last 12 months, we expected to see some volatility in markets, and we certainly saw that in April when the US announced what it referred to as “Liberation Day” and imposed tariffs on countries around the world. This led to a significant sell-off, followed by a very quick rebound in the days that followed. Despite that period of volatility, US markets have still delivered strong overall results for the year.

Returns for our clients have generally been in line with risk-adjusted expectations. When we compare actual portfolio outcomes with what we would expect over the long term, this year is probably one of the closest matches we’ve seen on a year-by-year basis.

Looking ahead, we are starting to see signs that inflation is rising, and small increases in unemployment. At this stage, these developments are not a cause for alarm. However if they continue, investing over the next few years would become more challenging.

In the United States, inflation remains higher than the Federal Reserve would like. However, we did see an interest rate cut this week of a quarter of a percent, with expectations of further cuts into 2026.

These decisions reflect concerns around the job market, which is part of the Federal Reserve’s dual mandate of managing inflation and unemployment. As a result, despite higher-than-desired inflation, we may still see further rate cuts in the US over the next year or so.

In Australia, the Reserve Bank has indicated that interest rates are as low as they are likely to go. We should expect rates to remain stable or potentially move higher, particularly if inflation increases. Thankfully Australia is not facing the same inflationary pressures from tariff impositions as the US, which makes managing inflation here less challenging.

We expect another modestly positive year in equity markets, with returns in the range of 5% - 9% in 2026. In term deposits and annuities, longer-term rates may move higher, potentially above 5.5% for five-year or longer investments. This could mean slightly lower equity returns, but stronger contributions from fixed interest and term deposits.

We do expect continued volatility. Political announcements from the US continue to be unexpected and unpredictable, and these can have short-term impacts on markets. That said, the US administration remains generally pro-business.

We are comfortable with where portfolios are currently positioned. We will be reviewing portfolios with all clients throughout 2026 to ensure they remain appropriately structured for an environment of higher inflation and higher interest rates in the years ahead.

Finally, we wish you and your families all the best for the festive season. Stay safe, and we look forward to working with you in 2026. And remember — we worry about your money, so you don’t have to.

Highlights - December 2025

• Global markets delivered mixed results over the past year, with strong returns in the US and Germany, and more modest performance from the Australian share market.

• Brisbane residential property continued to perform strongly, with solid price growth and rental returns over the past 12 months.

• Market volatility was expected and experienced during the year, particularly following US tariff announcements, but markets recovered quickly.

• Client portfolio returns were broadly in line with long-term, risk-adjusted expectations and closely matched projected outcomes.

• Early signs of rising inflation and slightly higher unemployment are emerging, but are not currently a cause for concern.

• The US Federal Reserve has begun cutting interest rates in response to employment conditions, with further reductions possible into 2026.

• In Australia, interest rates are expected to remain stable or move higher, particularly if inflation continues to rise.

• Equity markets are expected to deliver modestly positive returns in 2026, with increased opportunities emerging in term deposits and annuities.

• Continued market volatility is expected, driven largely by unpredictable US political announcements.

• Portfolios are appropriately positioned, with reviews planned throughout 2026 to ensure alignment with a higher inflation and interest rate environment.