July 2025 Client Investment Update

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

2025 has certainly turned out to be an interesting year. We had expected returns in high single digits and have been pleasantly surprised by just how strong markets have been. Both the Australian and US markets have exceeded 13% for the year, delivering outstanding performance results.

It has also been a year of significant change. The election of a new US president brought with it a shift in both economic and political direction. While markets experienced big sell-offs and big rebounds, we expect that when financial statements arrive for 30 June the performance numbers will be a pleasant surprise.

But that was last financial year. Now, our attention turns to the future.

Looking forward, we foresee a similar environment. Global markets remain heavily influenced by the US political agenda, and we expect this to continue. Policy announcements from the US will likely drive volatility, leading to both sharp gains and steep declines.

Despite that volatility we believe we are looking at a market that will produce a positive return over the next 12 months. We expect those returns to be in the high single digits again, around 7% to 8% per annum. Markets have shown resilience in the face of tariff announcements so far.

Tariffs are essentially a tax on consumers, raising the price of imported goods. Those taxes go towards helping the US debt problem but they do push up inflation, and one of the concerns is that inflation will move up as the tariffs are enforced.

Although we haven’t seen a meaningful inflation spike yet, that may change with a new round of tariffs scheduled to take effect from 1 August. If implemented, these tariffs are likely to trigger market fluctuations.

However, we've seen in the past that these tariffs have been announced, changed, and adjusted, with deals done that have taken a sting out of those. We expect this sort of behavior to continue, whether it be on tariffs or other announcements, with markets adjusting accordingly.

Over the past year, it’s become clear that reacting immediately to US political announcements from President Trump is often premature, as those announcements can be quite flexible and change very quickly. So we think it will be another year of high volatility and we expect markets to bounce up and down in response to changes in the US political arena.

Looking at the broader economic picture, we see a relatively resilient economy. Unemployment remains low, corporate profits remain strong, and interest rates are falling, though to a lesser extent than was expected.

There is some skepticism amongst Reserve Bank governors both in Australia and the US about whether tariffs will directly drive inflation.

We believe our current investment strategy remains appropriate for the conditions ahead, but we will continue to monitor developments and make adjustments as needed. If any of our clients are concerned about the current financial climate we're more than happy to speak with you and review your individual strategy.

Highlights – July 2025

• Markets outperformed expectations, with Australian and US returns exceeding 13% for the 2025 financial year.
  

• Volatility is expected to continue in the 2026 financial year, driven by global politics and US policy changes.
  

• Despite tariff concerns, the economic outlook remains resilient, with low unemployment and strong corporate profits.
  

• High single-digit returns (7–9%) are forecast for the year ahead.
  

• Tupicoffs' investment strategy remains appropriate and under ongoing review.