Quarter in Review: December 2025

21 January 2026

The December quarter saw the ASX300 Accumulation Index post a modest loss of 0.9%, with the Materials sector masking a tail of significant underperformance in the IT, Consumer Discretionary and Healthcare sectors. Ex-Materials, the ASX300 Accumulation Index would have been down 4.6%. Australian equities also had to contend with the RBA shifting to a more hawkish tone following persistent inflation surprises.

  1. Global Markets: The ASX underperformed offshore indices with the S&P500 and NASDAQ up 2.7% each and the MSCI World Index up 3.2%. Domestically, large caps underperformed small caps with the ASX Accumulation Small Ordinaries up 1.8%. This was primarily due to the gold bias in the small caps index, which constitute ~15% of weighting vs the ASX300 Accumulation Index at ~6%.
  2. Sector Performance: Outperformance was concentrated with only 3 out of 11 sectors posting gains. The best performing sectors were Materials (+13.0%), Energy (+0.9%) and Industrials (+0.6%). The worst performing sectors were IT (- 23.7%), Consumer Discretionary (-11.5%) and Healthcare (- 9.5%).
  3. Rates and Yields: The December quarter marked a divergent shift between local and US bond yields. The AUS 10-Yr was up 0.44% to 4.74% reflecting a more hawkish RBA stance following consecutive upside surprises in CPI data with current inflation tracking above the target band of 2-3% on average. Combined with the Australian unemployment rate remaining low at 4.3%, neither criterion in the RBA’s dual mandate appear to warrant rate cuts, and hence no rate cuts are being priced in for 2026. In contrast, the US 10-Yr was only up modestly by 0.02% to 4.17% with markets pricing in 2 rate cuts in 2026. US inflation, while muddied by the recent government shutdown, has by and large come in under expectations, with the market awaiting a potential replacement for Federal Reserve Chair Jerome Powell after his term ends in May 2026 – the front runners in Kevin Hassett and Kevin Warsh both viewed as doves. The AUD ended the quarter only modestly higher at US 67c.
  4. Commodities: Commodities were the defining theme over the quarter, namely in the sharp outperformance in precious metals. Gold was up 11.9% continuing its strong run with it being up 64.8% over the past year, propelled by geopolitical risk premia, dovish Federal Reserve rhetoric and continued Central Bank buying. Performance broadened out, especially in the latter part of the quarter in commodities like Silver (+51.4%), Copper (+21.5%) and Platinum (+27.3%). In bulk materials, Iron Ore posted gains of 4.6% holding above the US$100/tonne level helped by seasonal restocking ahead of Chinese New Year. Despite the Chinese property market remaining weak, demand has been offset by robust steel export activity. Brent Oil was the commodity disappointment falling 9.1% given oversupply as a consequence of increased OPEC+ production and inventory build.
  5. Corporate News: In corporate news, Macquarie Asset Management made a $11.6bn bid (28% premium) for Qube – a national Australian logistics operator. Brookfield and GIC lobbed a $4bn bid (26% premium) for National Storage REIT – a developer, owner and operator of self-storage assets across Australia and New Zealand. In October, AP Eagers announced a $452m equity raising to fund its $1bn acquisition for 65% stake in CanadaOne Auto. A number of small cap IPOs have also disappointed during the quarter, with Carma, Saluda Medical and Epiminder share prices falling more than 20% since IPO – this sets up an interesting backdrop for 2026 IPO candidates like Firmus, Estia and Greencross.