Market Wrap September 2025
August: Australian Small Caps rally
Australian large-cap equities posted strong gains in August, with the S&P/ASX 200 Index rising +3.1% for the month. The market was supported by strong corporate earnings and upbeat labour market data, which helped propel the index to fresh highs. Australian smaller companies significantly outperformed, with the S&P/ASX Small Ordinaries Index returning +8.41%, one of the strongest monthly gains over the year—as investor risk appetite extended into small- and mid-cap names.
International equities delivered mixed results. Large-cap stocks, as measured by the MSCI World ex-Australia Index, rose +0.92%, buoyed by strength in US and European markets. Global small caps performed strongly, investor sentiment shifted, which saw a rotation away from mega-cap tech and into economically sensitive small-cap equities driven by U.S. small caps which make up a large component of the index, the MSCI World ex-Australia Small Cap Index, returned +3.4% for the month. In contrast, emerging markets retreated, with the MSCI Emerging Markets Index down −0.37% in August, reflecting currency pressures and regional headwinds amid ongoing macroeconomic uncertainty.
Listed real assets also contributed positively. Global listed real estate benefited from the broader trend of easing monetary policy across developed economies. The FTSE EPRA/NAREIT Developed (AUD Hedged) Index rebounded strongly from July, delivering +3.63%. Listed infrastructure supported by expectations of a more accommodative interest rate environment also contributed, with the FTSE Developed Core Infrastructure 50/50 Index (AUD Hedged) posting a more modest +0.87% return.
Bond markets delivered positive returns over August. The Bloomberg AusBond Composite 0+ Year Index gained +0.33%, while global bonds also rebounded, with the Bloomberg Global Aggregate Index (AUD Hedged) rising +0.49%.
The Australian dollar remained stable against the US dollar, ending the month at USD 0.65 cents. On the policy front, the RBA cut the official cash rate by 25 basis points to 3.60% on the 12 August, marking its third rate cut in 2025.
Job Market:
U.S.
- The annual unemployment rate increased to 4.3%a near 4-year high in August 2025. Employment continued to trend up in health care, while jobs in Federal Government have continued to decline.
- U.S Nonfarm payrolls increased by 22,000 for the month, lower than the 75,000 forecast. The Labor force participation remained stable at to 62.3%
Locally
- The Consumer Price Index (CPI) in Australia rose 2.8% in the 12 months to July 2025. The top contributors to the annual change were Alcohol and Tobacco (+6.5%), Housing (+3.6%) and Food and non-alcoholic beverages (+3.0%).
- Australia's seasonally adjusted unemployment rate increased slightly to 4.2 percent in July 2025. Australia employment increased by 6,300 to 649,600 in July 2025. Australia’s seasonally adjusted labor force participation rate increased slightly to 67.1%.
Major Asset Class Performance
| Asset Classes | 1 Month % | 1 Year % | 5 years (p.a.) % |
|---|---|---|---|
| Australian Shares | 3.1 | 14.7 | 12.3 |
| Australian Small Companies | 8.4 | 23.4 | 7.9 |
| Global Shares (Unhedged) | 0.9 | 20.1 | 15.7 |
| Global Shares (Hedged) | 2.1 | 14.4 | 13.3 |
| Global Small Companies (Unhedged) | 3.0 | 10.0 | 12.8 |
| Global Emerging Markets (Unhedged) | -0.4 | 21.1 | 7.8 |
| Global Listed Property (Hedged) | 3.6 | 1.2 | - |
| Listed Infrastructure (Hedged) | 0.9 | 7.0 | 7.2 |
| Australian Fixed Income | 0.3 | 4.3 | 0.0 |
| International Fixed Income | 0.5 | 2.8 | -0.6 |
| Cash | 0.3 | 4.3 | 2.5 |
Source: Lonsec iRate, Rhombus Advisory, 31 August 2025
Indices used: Australian Shares: S&P/ASX 200 Accumulation Index, Australian small companies: S&P/ASX Small Ordinaries Accumulation Index, Global shares (hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares (unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global small companies (unhedged): MSCI World Small Cap Net Total Return USD Index (in AUD); Global emerging markets
(unhedged): MSCI Emerging Markets EM Net Total Return AUD Index; Global listed property
(hedged): FTSE EPRA/NAREIT Developed Index Hedged in AUD Net Total Return; Listed Infrastructure (hedged); FTSE Global Core Infrastructure 50/50 NR Index (AUD Hedged)
Cash: Bloomberg AusBond Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr Index; International fixed income: Bloomberg Barclays Global Aggregate
Total Return Index Value Hedged AUD
Please note: Past performance is not indicative of future performance.
Currency Markets
| Asset Classes | 1 Month % | 1 Year % | 3 years (p.a.) % |
|---|---|---|---|
| AUD / USD | 0.65 | 1.8 | -1.5 |
| AUD / GBP | 0.48 | -0.6 | -6.4 |
| AUD / EURO | 0.56 | -0.6 | -6.3 |
| AUD / YEN | 96.25 | -0.7 | 0.4 |
Source: Lonsec iRate, Rhombus Advisory, 31 August 2025 All foreign exchange rates are rounded to two decimal places where appropriate.
Please note: Past performance is not indicative of future performance.
