Quarter in Review: September 2025

The September quarter saw global equity markets extend the bull run with relative outperformance found in small caps and commodity linked names. A rising tide lifts all boats but relatively speaking, the Australian market lagged other developed market indices. Volatility continues to be a persistent feature in markets and the FY25 reporting season in August was no exception. Here are the highlights for the quarter:

1. Markets: In the September quarter, the ASX300 Accumulation Index went up 5%, led by small caps with the ASX Accumulation Small Cap Index up ~15% over the period. Small resources were up 26% for the quarter whilst an environment of rate cuts and better consumer sentiment has been favorable for small industrials. Australia lagged the US market, with the S&P500 up ~8% over this period. This was especially pronounced in the month of September with the ASX300 Accumulation Index down 0.7% against a generally rising market – registering Australia’s worst relative performance to developed markets since October 2021.
2. Sector performance: There was high variance in sector performance over the quarter with ~32% spread between the best and worst performing sectors. The best performing sectors were Materials (+22%), Utilities (+12.3%) and Consumer Discretionary (+10%). The worst sectors were Healthcare (-10%), Consumer Staples (-0.8%) and Energy (-0.2%). It was a tough quarter for the Healthcare sector, plagued by geopolitical headwinds with the US Trump administration threatening tariffs for pharmaceutical and medical device stocks, as well as heightened wage pressure for the service heavy domestically exposed businesses.
3. Reporting Season: The ASX market experienced a volatile reporting season, with the average price move on results day being ~8%. Stocks that missed earnings were harshly punished whilst small upgrades saw significant outperformance. This was especially prominent across large cap names such as CSL, Woolworths, James Hardie, QBE on the weaker side versus Coles, Stockland and Brambles on the stronger side. Overall, reporting season was weaker with a skew to earnings downgrades. However, dividend and buybacks were stronger which is a sign of continued strength of company balance sheets.
4. Rates and Yields: Bond markets priced in higher rates locally with the AUS 10-Yr up at 4.3%, reflecting stronger economic growth and higher inflation. Consumer sentiment has improved after the RBA cut rates and trading updates from retailers were positive. The RBA delivered a 25bps cut in August before pausing in September, with the next potential rate cut in November 2025. The US 10-Yr fell to 4.15% following the Fed cutting in September, with a firm focus on unemployment trends going forward.
5. Commodities: Commodity prices were stronger over the quarter across the spectrum which explains the dramatic outperformance of Materials. Iron Ore prices were up 11%, to US$105/tonne, with increased activity from Chinese steel mills assisting import demand. Gold continued its strong surge up 17%, given stronger central bank gold purchases and flight to safety given heightened geopolitical US tensions. Brent Oil was down 1% reflecting OPEC+ production ramp up leading to higher global inventories.
6. Corporate news: The takeover of Santos was withdrawn in September (see stock commentary) and ANZ announced 4500 job cuts and an agreement to pay $240m to settle ASIC investigations. SkyCity undertook a NZ$240m raising to retire debt and deleverage its balance sheet. Lynas took an opportunistic $750m raise to shore up its balance sheet to assist its 2030 strategy and pursue further downstream activities like magnet manufacture, taking advantage its strong share price, a function of the historical over reliance on Chinese rare earths by Western countries.