Jacqueline Barton

Economic update: August 2025

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In this month’s update, we provide a snapshot of economic occurrences both nationally and from around the globe.

KEY POINTS

  • Trump’s tariffs go live on 1 August – though some negotiations still ongoing.

  • Economic data indicated some softening in growth leading central banks to resume easing.

  • Equity markets remaining buoyed by generally positive US reporting season and prospect of interest rate cuts.

  • The RBA surprised markets by not cutting the official cash rate at its July meeting.

We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact your Financial Adviser.

THE BIG PICTURE

At last, the August 1st deadline for Trump’s tariff negotiations has arrived. While big numbers are still being bandied around, markets took the deadline in its stride.

Trump promised ‘great deals’ for the US in a bid to reduce or remove trade deficits and ‘non-tariff trade barriers’. But the truth seems far from the Trump vision.

The S&P 500 and NASDAQ Wall Street indexes hit repeated highs during July – a far cry from the turmoil created in April when the so-called ‘reciprocal tariffs’ were first mooted. Markets have moved on from Trumps fearmongering.

Trump was fixated on trade deficits and well-trained economists know that tariffs are not a cure for trade deficits. Indeed, deficits are not necessarily a bad thing. He exhorted that the US buys lots of cars from Japan but Japan doesn’t buy US cars. He failed to point out that the Japanese drive on the left (as do we) and so would need expensive conversion kits or a dedicated US production line to manufacture right hand drive cars – and at the right price and size for Japan’s roads!

He made a similar point about Vietnam not buying US manufactured goods. Vietnamese on average earn less than $US5,000 p.a. and how much are US made cars?

As far as we can ascertain, no concrete deals have been made in the sense of signed contracts. CNBC reported that eight ‘frameworks’ or loose commitments have been made but it could take years to formalise these complex notions. Eight deals is a far cry from the 90 deals in 90 days the administration predicted in early April. And 200 deals being negotiated now seems fantasy!

The UK was the first cab off the rank to get a so-called deal months ago – at 10%. But Trump slapped a huge 50% tariff on steel and aluminium (and now copper) after that so-called agreement. As late as July, Trump met with his opposite number, PM Keir Starmer, in Trump’s Turnberry golf course to ‘refine’ the ‘agreement’.

He chose the same Scottish venue to work out a 15% deal with the EU. Part of the ‘deal’ was said to be a $750B purchase of US energy and $600B investment in the US. Several commentators pointed out that these sums included many projects already agreed to! It is close to impossible to get an independent appraisal of these ‘deals’.

In the same cavalier style, Trump and his entourage descended upon the Federal Treasury building in Washington to confront Fed chair Powell over the cost blow out in the Fed refurbishments that were started a decade ago – and to put pressure on Powell to cut rates.

On camera, Trump upped his estimate of the blowout from $2.7B to $3.1B and handed Powell a letter to back up his claim. Powell quickly pointed out that the latest increase detailed in the letter was due to now including a third building that was completed five years ago. A journalist then asked a direct question about whether there was enough evidence to dismiss Powell. Trump dithered but answered no.

Trump appears to be operating without the checks and balances of Congress determining and imposing penalties without rational justification or consultation. Strategically it may be prudent for reluctant combatants to engage as small targets and avoid or limit confrontation until Trump’s term as president ends. Conversely, court cases are currently being heard that might rule his trade deals illegal. Many think the cases will make it to US Supreme Court, this process could take months at least.

Before Trump’s second term as president, the average import tariff into the US was 2.7%. As at August 1st that average is close to 18%. The tariff deals negotiated to date only seem good because of the excessive levels of his estimates of the revenue generated by the reciprocal tariffs.

Trump repeatedly states that US interest payments on its debt would fall by $360B for each point decrease in the Fed rate. As with all loans, the rate charged depends upon a variety of factors including the term of the loan. Just as with home mortgage payments, different rates are offered for loans of different fixed terms such as one, two and three years – or variable rates. Indeed, when the Fed cuts its overnight rate, it is not unusual for the yield on longer-term Treasurys to go up rather than down! Indeed, the 100 bps of cuts so far in this cycle have had no discernible impact on the 10-year Treasury yield. And no-one, other than banks in the clearing system, borrows or lends at the Fed Funds Interest Rate.

At the Fed Reserve building site press conference, Trump pointed out that the US economy was ‘hot’ but that an appropriate Fed rate would be 1%! While we think the US economy is not broken it is certainly not hot. If it were, and the Fed rate was cut to 1%, inflation of a scale we have not witnessed for a long time would probably re-emerge!

The impact of new tariffs on US inflation has been a long time coming. Front loading inventory building and delays in tariff impositions has pushed out that impact. However, the June US CPI and PCE inflation reads published in July did show a slight blip up in the data. There are two reasons not to worry too much about tariff-induced inflation. First, tariffs are a one off and, therefore, do not constitute inflation in the sense of macroeconomic policy. Keeping rates on hold or otherwise will not affect any blip. Secondly, it is now thought that the tariff-induced price increase (not inflation!) is likely to be only about 1% (or possibly up to 2%) and it will be gone by late 2026.

The Australian economy is in a very different position to the US. Our jobs data are showing nascent signs of weakness and GDP growth (in per capita terms) has been negative for most of the last two years and more.

It was reported that more than half of the Australian electorate derives its major source of income from the government (i.e. the taxpayer). The impact of private sector wealth on total employment is, therefore, muted.

The RBA astounded economists by not cutting Interest rates at the July meeting. The market is now pricing a reasonable chance of a double interest rate cut at the August 12th meeting. The RBA claimed it was waiting for the quarterly CPI Inflation data as a more accurate reading than the monthly variant. The quarterly read for June quarter came in at 2.1% and the monthly at 1.9%. With the target range being 2% to 3%, the RBA needs to get a move on and resume reducing the cash interest rate.

Earnings season for US companies is going well for the June quarter and much better than many expected not that long ago. We believe that there is a long way to run on the AI boom and Trump’s ‘Big Beautiful Bill’ will add some stimulus in the near term. What the future of the US economy is in the longer term is more opaque but we are optimistic about US equities for the rest of this year – at least.

US Treasury yields have stabilised in recent weeks. The 10-year and 30-year Government Bond yields are now comfortably below the 4.5% and 5.0% thresholds that rattled markets back in April.

The Fed kept rates on hold at their July meeting and until the announcement of weaker employment data, had stepped back from an interest rate cut in September. However, market pricing indicates the Fed may produce one or two more cuts this year.

Asset classes

AUSTRALIAN EQUITIES

The ASX 200 had a strong month to start the 2026 financial year. Capital gains for the broader index were +2.3%. Healthcare led the way with a gain of +9.1% and Energy (+5.7%) and Materials (+4.1%) were not far behind; Utilities gained +5.1% and IT (+5.0%). Financials (-1.0%) was the only sector to lose ground.

INTERNATIONAL EQUITIES

The S&P 500 also performed strongly in July with a gain of +2.2%. Indeed, this index posted six consecutive daily closing highs late in the month.

The London FTSE Index was even stronger at +4.2%; Emerging Markets posted a gain of 3.1% and China’s Shanghai Composite Index +3.7%.

BONDS AND INTEREST RATES

The Fed continued to resist Trump’s calls to cut interest rates and remained on hold at its July 30th meeting. Powell moved markets slightly when he mentioned, in questioning, that an interest rate cut in September was not the almost forgone conclusion that the market had anticipated.

The yield on 10-year and 30-year US Treasuries remained comfortably below the ‘psychological’ levels of respectively 4.5% and 5.0% throughout the month.

The CME Fedwatch tool reduced the chance of a September interest rate cut from about 67% to 40% during Powel’s post meeting press conference.

The RBA astounded markets by not cutting the official cash interest rate at its July meeting but it looks set to make at least one 25-bps (0.25%) cut on August 12th. The chance of a double cut was priced at 51% on the RBA tracker tool located on the ASX website.

The Bank of Japan was also on hold – but at 0.5%. Another hike is expected this year to help combat inflation.

The Bank of Canada was on hold at 2.75% but it forecast GDP growth in June quarter of -1.5%.

The ECB was on hold at 2.15% and June quarter growth came in at +0.1%.

OTHER ASSETS

Brent Crude oil (+7.3%) and West Texas Intermediate crude oil (WTI) (+6.4%) oil prices were up strongly in July.

The price of gold was flat (+0.4%) in July while the price of copper (-4.0%) was down sharply after Trump announced a 50% tariff on the US imports of the metal. The price of iron ore was up +6.2%.

The US equity market VIX ‘fear’ index was range-bound near normal levels.

The Australian dollar (-1.2%) was down modestly against the greenback.

REGIONAL REVIEW

AUSTRALIA

The last two months of changes in Australia jobs data more or less cancelled each other out to leave a flatline in total employment and its major components. The unemployment rate jumped up from 4.1% to 4.3% after a year of little movement. It is too soon to ring the alarm bells but unemployment can rise sharply when a big slowdown gets underway.

Australia appears to be making little headway in getting a trade deal done with the US. The negotiated tariff was said to be 10% in April but now Trump is talking of 20%. It appears Albanese cannot even get a meeting with Trump. The US is not one of our big trading partners, but any new instability could increase the prospect of further slowing in our economy.

CHINA

The US is trying to encourage China into diverting its manufacturing output into domestic consumption. Deflation is still rife; Producer Prices (PPI), or inflation of inputs, stood at -3.6% in the latest reading.

China exports grew at 5.8% against an expected 5.0% and up from 4.8% in the previous month. China is pivoting its export drive away from the US.

The US and China are continuing their trade negotiations. The ’due date’ seems to be flexible providing the US thinks China is acting in good faith. China still holds the whip hand on rare earth exports. It has also brought up relaxing US export controls the US usually attributes to ‘security issues’.

UNITED STATES

US jobs (non-farm payrolls) were up +147,000 and the unemployment rate was down to 4.1% following 4.2% in the previous month.

Trump’s so-called Big Beautiful Bill got through the House and the Senate. The consequences of it are not fully understood. There are tax cuts and some stimulus spending but there isn’t a clear direction for the US economy.

One commentator on CNBC TV speculated that Trump has by stealth created a Value Added Tax VAT (sales) tax through the tariff programme. Trump cannot reasonably be seen to raise corporate or personal taxes but a ‘tariff’ can be seen as being different. Since business and individuals are, in effect, paying the tariffs of around 18%, they are paying the equivalent of a European style VAT without Trump losing face! The US needs the revenue. Perhaps this was a smart way to raise it?

General Motors, in a report to the stock exchange for the June quarter, pointed out that it lost US$1.1 Bn from tariffs in the quarter. It now expects the impact over a full year to be US$2 Bn. Business and consumers are carrying the can and Trump does not acknowledge this.

The new tariffs on cars imported from the EU and Japan are now at a cost advantage to those built by US brands in Mexico and Canada because of the difference in tariffs!

CPI inflation did rise a little to 2.7% p.a. but, ex-shelter, CPI is still on target at 2% p.a. However, that 2% p.a. is a sharp rise over the previous comparable 1.5% p.a. The pass-through of tariffs might well be underway. Fed chair, Jerome Powell, pointed out that the easing of inflation in services has masked some of the tariff-induced price rises in goods.

Growth for the June quarter was published at the end of July. It came in at 3.0% but it should not be viewed in isolation – as Powell pointed out. Imports were up +37.9% in the March quarter and down -30.3% in the June quarter as importers tried to minimise the impact of introduction of tariffs. The average GDP growth for the first half of 2025 was 1.2% p.a., which is about half of what existed in 2024.

EUROPE

Europe diligently tried to negotiate a trade deal with the US. It finished up with a tariff of 15% on most goods but some are tariff free!

At least the US dropped its commentary about VAT (or GST) being a trade barrier. The EU is to buy US$750 Bn of energy from the US and US$600 Bn of investment in the US economy. However, many sources claim that much of this commitment is already in place.

EU growth in the June quarter was +0.1% but Germany’s GDP was down -0.1%. German inflation dipped to 1.8%.

UK inflation hit an 18-month high at 3.6% and core inflation was at 3.7%.

REST OF THE WORLD

The UK has threatened Israel with acknowledging the State of Palestine if sense is not brought to bear over Gaza.

Japan negotiated a 15% trade deal with the US and has agreed to invest US$550 Bn in the US economy.

The US imposed a tariff of 15% on Israel and 35% on Canada (but 40% if there is transhipping). The US imposed an array of tariffs of between 10% and 41% on other countries.

India currently has a negotiated tariff of 25% (plus penalties for trading with Russia). Korea’s tariff has come down to 15% from 25%; they have agreed to spend US$100 Bn on US energy and US$350 Bn on other investments.

The Bank of Canada held interest rates steady at 2.75% in July but it is predicting a -1.5% fall in June quarter GDP growth.

Investing with Purpose: A Guide to Sustainable Wealth Creation

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As global awareness of environmental and social issues continues to grow, Australians are increasingly seeking ways to align their financial decisions with their personal values. Sustainable investing offers a powerful opportunity to do just that—supporting positive change while building long-term wealth.

What Is Sustainable Investing?

Sustainable investing involves selecting investments that aim to deliver strong financial returns while also contributing to environmental, social, and governance (ESG) outcomes. This includes:

  • Environmental: Supporting companies that reduce carbon emissions, promote renewable energy, and conserve natural resources.
  • Social: Investing in businesses that champion diversity, human rights, and community development.
  • Governance: Backing organisations with transparent leadership, ethical practices, and strong shareholder accountability

Why It Matters

In Australia, ESG criteria are becoming a central part of investment decision-making. Investors are increasingly considering factors such as carbon footprint, diversity and inclusion, and corporate governance when evaluating opportunities

This shift reflects a growing desire to make a positive impact without sacrificing financial performance.

Investment Strategies for Sustainability

There are several ways to incorporate sustainable principles into your portfolio:

  • Thematic Investing: Focus on sectors like clean energy, sustainable agriculture, or ethical technology.
  • Impact Investing: Target investments that aim to generate measurable social or environmental benefits.
  • ESG Integration: Include ESG factors in traditional financial analysis to identify long-term risks and opportunities

Australian Leaders in Sustainability

Australia is home to many companies leading the way in sustainable practices. Examples include:

  • Renewable energy firms investing in wind and solar projects.
  • Financial institutions supporting community development through ethical lending.
  • Consumer brands committed to reducing waste and improving supply chain transparency

Getting Started

If you’re considering sustainable investing, here are a few practical steps:

  1. Clarify Your Values: Identify the causes and issues that matter most to you.
  2. Research ESG Ratings: Use online tools to assess the sustainability performance of companies and funds.
  3. Consult a Financial Adviser: Seek guidance on building a portfolio that reflects your values and financial goals

Challenges to Consider

While sustainable investing offers many benefits, it’s important to be aware of potential challenges:

  • Performance Evaluation: ESG investments may perform differently than traditional ones, especially in the short term.
  • Standardisation: ESG reporting varies across companies, making comparisons difficult.
  • Trade-offs: Some ethical choices may involve accepting lower returns or higher volatility

Sustainable investing is about more than just returns – it’s about responsibility. By aligning your investments with your values, you can help shape a better future while pursuing your financial goals.

From Uncertainty to Confidence: The Life-Changing Impact of Financial Education

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Every day, we make decisions that shape our financial future—whether it’s choosing a mortgage, planning for retirement, or simply deciding how much to save. Yet many Australians still feel uncertain about their financial choices. That’s where financial advice and education come in—not just as tools for wealth creation, but as pathways to confidence, clarity, and control.

  1. Confidence in Your Future

Research shows that Australians who receive financial advice are significantly more confident about their future. In fact, 70% of advised individuals report feeling more secure about their financial goals, and 79% say they sleep better at night knowing their finances are in order (2025).

This confidence stems from having a trusted adviser who helps you navigate complex decisions and plan for both expected and unexpected life events.

  1. Better Decision-Making

Financial literacy empowers you to make informed choices. Whether it’s selecting the right investment strategy or understanding the implications of a loan, education helps you avoid costly mistakes and seize opportunities.

According to a recent study by the Financial Advice Association Australia (FAAA), pre-retirees who receive advice are twice as confident about having enough money for retirement than those who don’t (2024).

  1. Reduced Stress and Anxiety

Money is one of the leading causes of stress. But with the right guidance, you can gain clarity over your financial situation and learn strategies to manage it effectively.

A study by CoreData and IOOF (2021) found that 88% of Australians who received professional advice felt less financial stress than those who didn’t.

  1. Stronger Relationships

Financial stress can strain relationships with family and friends. By improving your financial literacy and working with an adviser, you can reduce tension and build healthier dynamics.

In fact, 41% of clients who received financial advice reported better relationships with loved ones (2020).

  1. Discovering What’s Possible

Financial advice isn’t just about numbers—it’s about unlocking possibilities. Whether it’s retiring earlier than expected, choosing the right school for your children, or living debt-free, advice helps you explore what’s achievable and how to get there.

Financial advice and education are life changing. They offer more than just financial returns – they provide peace of mind, empowerment, and the ability to live life on your terms.

Economic Update: July 2025

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In this month’s update, we provide a snapshot of economic occurrences both nationally and from around the globe.

Key points:

  • Tensions ease in the Middle East post US bombing run, Israel and Iran truce.

  • The US Federal Reserve held its interest rate ‘on hold’ citing tariff inflation risk, ECB cut 0.25%.

  • Australian economy softening and expecting further RBA interest rate cuts.

  • US equities close June at all-time highs, markets in general looking through the short-term noise

We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact your Financial Adviser.

The big picture

At the end of June 2024, the S&P 500 had completed a stellar year with a gain of over 20%, while the ASX 200 recorded a solid gain of around 10% over that same period.

In spite of the chaos caused by Trump’s policies, and the ongoing conflicts in the Middle East, these two equity indexes did surprisingly well – again – in the year to June 30 2025. The ASX 200 rose 10.0% in FY25 and the S&P 500 rose 13.6%.

The reciprocal tariff policy announcement by US President Trump on April 2nd 2025, for the so-called ‘Liberation Day’, caused a sharp fall in the S&P 500 of 18%. The recovery since that fall is the fastest on record for a decline of that order of magnitude.

A year ago, central banks were only just getting started on cutting interest rates as the inflation problem seemed to have been close to being beaten. Now, many central banks are close to having brought interest rates down to near neutral levels. Interestingly, the US and Australian central banks are not yet among that group.

The reason stated by the US Federal Reserve for not having cut further is ‘the unknown extent of the possible increase in inflation caused by Trump’s tariff policies’. There is yet no material sign of tariff-induced inflation in the US but many expect a one-off lift in inflation, driven by tariffs of around 1%.

Given that US Consumer Price Index (CPI) inflation-less-shelter has been running at around 1.5%, and shelter inflation (a third of the index) has been falling steadily, there is some optimism that US inflation might struggle to get above 3% even with tariffs (unless Trump revisits his trade-war policies). And then inflation should subside back to 2% as the imposition of tariffs should only cause a one-off increase in prices.

Trump has been berating Federal Reserve (Fed) chair, Jerome Powell, for being ‘too late’ to cut rates. Trump has threatened Powell’s position and has used insulting language against the man. Despite this, Powell has been calm and steadfast in his management of monetary policy.

The US economy, in terms of growth and jobs, is reasonably strong and so interest rate cuts are not necessarily urgent – but some slightly softer economic data, and the apparent containing of inflation, creates the opportunity for two or three more interest rate cuts this year.

Market probabilities for the next interest rate cut were firmly for the September meeting. However, three members of the Fed’s Open Markets Committee came out in favour of a July interest rate cut during the last weeks of June. The probability of a July interest rate cut remains low at circa 20%.

The RBA is expected to cut its interest rate in July and again (maybe more than once) over the rest of the year.

Australia’s GDP growth rate at 0.2% for the March quarter was unexpectedly low despite apparent resilience in the labour market.

A significant portion of new jobs in the last financial year were in the National Disability Insurance Scheme (NDIS) programme. While the majority of these jobs are possibly very useful additions to our health care initiatives, they are funded by the taxpayer and so do not reflect the strength of the economy.

Moreover, 10 of the last 12 reported monthly unemployment rates were 4.1% (the other two were 3.9% and 4.0%); an unusually stable set of data. The results are based on a small sample of around 26,000 households which is scaled up to represent a population of nearly 11 million households! We would have expected much more sample variation from month to month, as we usually observe.

We see no alarming signals in the broad macro data for Australia and the US. However, there are many possible sources of volatility in equity markets in the year ahead.

Trump’s retaliation tariffs were announced on April 2nd but were put on hold for 90 days – to July 9th – but only a few seem to think that the tariff increases won’t further be delayed – or even abandoned.

The average tariff before Trump’s ‘Liberation Day’ tariff policy announcement was about 3% and now it is closer to 15%. Somebody has to pay for it. Tariff is only another name for tax.

Exporters might try to absorb some of the costs before they export. That doesn’t seem to be prevalent. Correspondingly the importer in the US can try to absorb the cost but that too is difficult. Marelli, a large supplier of auto parts in the US that imports parts for Nissan and Jeep amongst others, filed for Chapter 11 bankruptcy protection as it found it couldn’t pass on the tariffs and it could not viably absorb their costs. Others will surely follow.

The third agent to wear the costs is the US consumer. We haven’t seen any material impact on consumer price indexes as many companies built up substantial inventories before the tariffs came in and are only now starting to pass on the additional cost. Some say the US might still have one to two months inventory at hand.

Nike just reported earnings and announced that prices will have to go up shortly; footwear is expected to rise in price by 8% to 15%.

Since lots of goods are not imported, or are imported from low-tariff countries, experts reportedly are estimating the increase in the CPI to be of the order of 1% p.a. If, however, Trump starts bringing back higher tariffs, the US economy is likely to be a casualty.

Tariffs, to date at least, are not bringing in anything like the tax revenue Trump had foreshadowed. Moreover, most if not all that revenue is coming from US consumers and businesses. It is largely a redistribution of tax revenue for the government and tariffs will almost certainly reduce consumption due to the price increases.

China redirected much of its exports to countries other than the US during Trump’s first term as President and is seemingly starting to do it again. And China is now switching to importing beef, soya beans and oil (amongst many other goods) from other countries. The US could become increasingly isolated, if it is not careful.

There is much more to these trade deals than tariffs. There is no mainstream economic support for tariffs to redress trade balances. Indeed, trade imbalances are to be expected and welcomed in many cases.

One contentious point for the US-China relationship involves the export of certain rare earth minerals to the US. China has a near monopoly on the production of special magnets (and other goods) from rare earths that are essential in the manufacture of Electric Vehicles, rockets (commercial and military), drones and other high-tech products.

The US reportedly thought that it had gained access to China’s rare earths through the Geneva talks held between the two parties in May, but the extensive text of the agreement only devoted one sentence to non-tariff trade barriers – and there was no mention of rare earths.

The London talks between China and the US, held in June, were then set up to resolve this issue but failed again. Rare earths were mentioned but sources reported that the agreement is only for six months and only covers commercial – and not military – uses. The can has again been kicked down the road, this time until the end of the year.

Ford reported several of its auto plants in the US were on idle as they awaited a supply of rare earth products. China is in the box seat with this and it is big enough to see this confrontation through.

Almost out of left field, Israel attacked Iran over its nuclear build-up. It does not have the fire power to resolve the issue on its own but that didn’t stop Israel starting a renewed, heightened conflict.

Trump went to the election last year on a non-aggression platform – as he did in in his first term. The US was in negotiations with Iran over uranium enrichment. After the Israeli rocket attack, Trump said he might do something over the next two weeks. It only took him a day or two.

The US sent B-2 stealth bombers and submarines to fire on Iran’s three main nuclear facilities that happen to lie in a straight line south between Tehran and Qatar on the Persian Gulf.

The US reported that all three facilities were destroyed without casualties and without serious damage to property other than that associated with the facilities. Perfect! And a cease-fire between Israel and Iran was ‘on the cards’ in the next 24 hours, so Trump said. That’s why Wall Street rallied hard that night.

CNBC reported that there was a long line of trucks outside the facility containing the enriched uranium over the weekend before the bombing. It was being speculated that the trucks were there to move the uranium to another location!

Trump called the raid something like the ‘most decisive raid in history’. An expert came on TV and said all the enriched uranium could have been placed in the boots of 12 standard cars.

Just to save face, Iran attacked the major Middle East, US base in Qatar. To make sure everything was fine, Iran gave prior warnings to Qatar and the US. Iran fired 14 missiles; 13 were intercepted and the other missed the target completely. Everyone was a winner!

Recall, Trump did ‘big trade deals’ with Qatar and Saudi Arabia only weeks ago. It is hard not to think there was collusion over orchestrating a face-saving resolution to the conflict and to take attention away from the failed tariff deals.

Other reports questioned whether the US bombs could have struck 300 feet [say 100m] below the surface [under a mountain?] to reach the facilities. We don’t know what the truth is but we are thinking the strike wasn’t as successful as Trump announced – but it might have been enough to make the Iranians seriously consider their options for continuing to engage in this current conflict.

The collective wisdom of experts we have seen is that Iran’s nuclear program has been set back months rather than years. But importantly, Iran now knows that stealth bombers can turn up when they are least expected and that they can carry lots of very big bombs [up to 30,000 pounds each!]. And there is now proof that Trump is prepared to push the button.

As the dust settles on the upheaval Trump has caused to trade, immigration, and efficiency (through the failed DOGE project run by Elon Musk) we are more optimistic about a less volatile future for Wall Street in the nearer term at least. The S&P 500 finished June with a new all-time high. Recent earnings reports have been stronger than expected and the future of Artificial Intelligence (AI) seems far more secure than some considered earlier in the year.

On the fiscal front, Trump has been facing a multitude of problems in trying to get his ‘Big Beautiful Bill’ through Congress. It is now passing through the Senate but it has to go back to the House of Representatives after substantial changes being made, and agreed to, by the Senate. Even Republicans were demanding changes!

Two are voting against the Bill and six were reportedly undecided.

The Bill, if it goes through, is likely to add just over $3 trn to the current $36 trn government debt. The bill includes tax breaks and a substantial lifting of the debt ceiling. The logic behind the bill is that it will stimulate the economy and that growth will improve government revenue to offset the tax breaks. Musk launched a scathing attack on the Bill and has vowed to back candidates against those Republicans that vote for the Bill.

On other matters that many think are likely to guide the future of the global economy, the advent of DeepSeek – a China ‘alternative’ to ChatGPT and other AI projects – earlier in the year caused many to think it might be the end for Nvidia and other big US technology firms. It wasn’t, and it looks unlikely to be. Nvidia reported well in June and many of the mega tech companies are promising to invest hundreds of billions of dollars in the years to come.

It is important for investors to appreciate what AI can currently do and what more there is to do. Without that, the fear of losing jobs to AI is not rational.

At this point in time, AI is good at collecting information and summarising it. But it still makes lots of mistakes and needs human oversight to ‘train’ the models.

What AI cannot do at this point in time is reason or generalise. For example, it cannot answer the question, ‘What strategy should we follow for success in a given business’. Moving to the ‘super AI’ that will bridge this gap is what is consuming the top tech firms. Not only is the solution likely to be a long way off – it might never be achieved. Meta has reportedly offered sign-on bonuses of $100m each in poaching up to 10 AI experts.

To reason with facts and alternatives requires ‘weights’ to be applied to consolidate alternatives. That’s what human brains can do to differing extents. AI cannot yet do it at all.

Repetitive, low-level jobs are already at risk. True leaders in thought and business are very safe at the moment – and maybe for our lifetimes.

The outlook for equity markets for the coming period remains positive supported by continued growth and utility of AI and modest aggregate earnings growth generally however, at current elevated valuations they remain vulnerable to macroeconomic (e.g. detrimental tariff policy changes) and/or geopolitical shocks.

US bond yields have stabilised at levels comfortably below the ‘trigger points’ of 4.5% for the 10-year and 5.0% for the 30-year that caused equity market volatility in April and May.

Australian economic conditions are not great but will probably be boosted by multiple interest rate cuts by the RBA in the remainder of 2025. The ASX 200 finished the year to 30 June only a fraction (less than 0.5%) off its all-time high.

Asset classes

Australian equities

The ASX 200 made moderate gains in June (+1.3%) but gained +10.0% over the year to 30 June. If dividends were reinvested, the total return for the year (without franking credits) was 13.8%.

The Energy sector (+9.0%) and Financials (+4.3%) were the best performers for capital gains in June. Over the year to 30 June, Telcos (+36.7%), Financials (+29.4%), Industrials (26.2%), IT (+24.2%) and Consumer Discretionary (20.8%) were the stand-out sectors in terms of total returns. Health (-4.6%) and Materials (-2.3%) were the only sectors to go backwards over that period.

Our analysis of broker-based forecasts of company earnings for the coming year varies but in general are pointing to a positive outcome, providing we get no big surprises.

International equitites

The S&P 500 finished June very strongly – up +5.0% – and surpassed its all-time high on the last day of the month. For the year to 30 June, the S&P 500 gained 13.6%.

Of the major indexes we follow, the Nikkei gained the most over June at +6.6%. None of these indexes went backwards except for the DAX at -0.4% and the FTSE at -0.1%. Emerging Markets gain was +4.5%.

For the year to 30 June, the DAX gained +31.1%, the Shanghai Composite +16.1% and the FTSE +7.8%. Emerging Markets gained +10.6%. The Nikkei was the worst performer of the indexes we follow but it still grew by +2.3%. The World index grew by +14.7%.

BONDS AND INTEREST RATES

The Fed continues to resist Trump’s calls to cut interest rates but there is pressure coming from within for the Fed to cut in July. Two or three cuts are expected by the market in the rest of this calendar year.

The RBA is widely expected to cut its overnight cash rate (OCR) again in July. It appears to be on a rate cutting cycle taking this interest rate to around 3% by the end of the year – or lower!

The Bank of Japan was ‘on hold’ in June, as was the Bank of England. The Swiss National Bank cut its interest rate to 0.0%.

The big question facing policy and lawmakers in the US is what will happen to longer term rates. In the Senate hearing, a Republican senator berated Powell for costing the US economy $400bn this year by not cutting interest rates – due to the interest payments on debt.

The senator showed a complete lack of understanding of how monetary policy works. The Fed only has an impact on overnight rates and limited impact on yields one to two years out. It is possible, and has often happened, that an interest rate cut by the Fed might mean an increase in the 10-year and 30-year Government Bond yields! Longer-term yields are greatly affected by inflation and growth expectations, amongst other factors.

Other assets

Brent Crude oil (+5.8%) and West Texas Intermediate Crude oil (WTI) (+7.1%) prices were up in June. Over the year to 30 June, the losses were -21.8% and -20.1%.

The price of gold was flat (0.0%) in June while the price of copper (+6.0%) was up sharply again. Iron ore prices (-3.6%) were down.

The VIX ‘fear’ index is almost back to a near-normal level at 16.7 after peaking at 22.2 earlier in the month. The VIX peaked at 52.3 in the year to 30 June.

The Australian dollar (AUD) traded in a modest range over June but finished up by +1.8% on the month. Over the year to 30 June, our dollar was down by -1.1% against the US dollar.

Regional review

Australia

Australia jobs data for the latest month provided mixed evidence of an economy that is ticking along. There were -2,500 jobs lost but +38,700 full-time positions were created; there was an offsetting -41,100 part-time jobs lost. The unemployment rate was steady at 4.1%.

The March quarter GDP data were released in June and largely disappointed. Quarterly growth was 0.2%, which was less than the 0.4% expected. The annual growth rate was 1.3%. Per capita growth returned to negative territory with readings of -0.2% for the quarter and -0.4% for the year. The brightest spot in the National Accounts was a rise in the household savings ratio to 5.2% from 3.9%. We consider a reading in the range of 5% to 7% to be ‘normal’. After some time of having a low savings ratio, households are now back to trying to build for a solid future.

The Westpac and NAB consumer and business sentiment indexes were largely unchanged and weak.

The monthly CPI inflation data were at the low end of the RBA target range at 2.1% (headline) and 2.6% (core).

China

Inflation was again negative for the year at -0.1% but China is actively trying to stimulate its economy.

The wild swings in US import tariffs have disrupted shipments in the March and June quarters to try to minimise aggregate tariff revenue.

For example, in May, China’s exports to the world were up +4.8% but down to the US at -4.5%. Imports from the US were -18.0% but only down -3.4% from the rest of the world.

Industrial profits slumped -9.1% in the latest month. It will be at least some months before we will get data that can readily be interpreted.

China must redirect lost US demand to domestic demand and to new markets.

United States

US jobs were up +139,000 when only +125,000 were expected. The unemployment rate was steady at 4.2%. Wage growth was 0.4% for the month and 3.9% for the year.

GDP growth for the March quarter was revised down to -0.5% from -0.2% as imports were rushed in to beat the imposition of new tariffs.

The Atlanta Fed puts out ‘nowcasts’ ahead of the official GDP data. Its current estimate for June quarter growth is 2.9%. The OECD predicts growth for 2025 to be 1.6% and the same for 2026.

The respected University of Michigan consumer sentiment survey reported a bounce back to 60.5 from 52.2.

The 1-year inflation expectations data came in at 5.1% which is well above the Fed’s estimate of 3.2% but down from its previous month’s reading at 6.6%.

Retail sales were -0.9% for the month and +3.3% for the year. When adjusted for inflation the readings were -1.0% for the month and +0.9% for the year. There are nascent signs of a weakening consumer, but an interest rate cut is not urgent – just desirable.

Europe

UK growth slumped to -0.3% and the unemployment rate rose to 4.6% from 4.5%. The minimum wage was increased by 6.7% in an attempt to play catch up on the ground lost over the last couple of years due to the cost-of-living crisis.

The European Central Bank (ECB) cut its interest rate for the 8th time by 25 bps to 2.0%. Inflation was under control at 1.9%.

The Swiss National Bank cut its rate by 25 bps to 0.0%.

How intuitive tech is helping to solve the great adviser talent drain

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Australia’s advice gap is well documented: with fewer than 15,600 licensed advisers and over 11 million people needing financial guidance, there’s just one adviser per 1,695 Australians. The numbers clearly don’t add up.

The unmet advice needs for a huge swathe of Australians is one of the great challenges of the modern advice era.

As experienced advisers retire or burn out – and too few new recruits step in – firms are grappling with rising workloads and shrinking teams. Amid concern over a “great adviser talent drain”, many see AI and automation as either the saviours or the job stealers.

The reality is more nuanced. Technology isn’t a silver bullet, but rather, it’s a lever. It’s tempting to view AI and automation as panaceas, but the real breakthrough comes when we design technology around people, not the other way around.

True progress comes not from replacing people with machines, but from embedding intuitive tools (AI-powered and others) that amplify the impact of advisers, paraplanners and support staff.

When AI is integrated into human-centred workflows, it frees people from repetitive tasks, giving them more time to focus on high-value client work. This empowers advisers and support teams, boosting morale, productivity, client outcomes and satisfaction – helping to shrink the advice gap and build a smarter, more scalable advice business.

Here’s how:

Better tools, better business performance

This isn’t about “robo” advice. It’s about embedding intuitive, human-centred tools that reduce administrative burden and elevate the client experience – enabling advisers and support teams to focus on what they do best.

Tools like stochastic and optimisation modelling simulate hundreds of “what if” scenarios in seconds, helping advisers make faster, more informed decisions. Intelligent templates pre-fill the right questions and disclosures, while workflow “playbooks” guide teams through repeatable, compliant processes. Smart “portals” provide clients an engaging digital experience, enabling a degree of self-service to supplement human service. These are foundational shifts that streamline and improve the entire advice engine.

The proof is in the numbers. While the industry average is around 97 clients per adviser, some tech-enabled advice firms in our community are serving double, triple or even quadruple that number – without sacrificing quality or compliance. This scale was unthinkable just a few years ago, but the time clawback and efficiency gains are helping to improve several business and service metrics, and it’s also becoming the benchmark for advice businesses using the right tools.

As processes become more efficient, business performance lifts. Advisers gain the capacity to serve more clients without burning out. In turn, the support stalwarts of quality advice – the paraplanners – find the headspace and the confidence to step into higher advice roles, strengthening the internal talent pipeline. And as production friction eases, profit margins improve.

In short, the smartest tech doesn’t replace people – it empowers them. It’s the catalyst for a more scalable, sustainable and human advice model, helping to close the advice gap.

A people-first approach to practice efficiency

It’s not just advisers who benefit from smarter systems – it’s everyone behind the scenes.

Client service officers, paraplanners and operations staff do the heavy lifting to keep practices running, yet they’re often overlooked in transformation efforts. When equipped with intuitive, integrated tools – from real-time collaboration platforms to dynamic modelling software and transparent task tracking – the impact is immediate. Workflows tighten, bottlenecks clear and confidence grows.

Importantly, these tools aren’t developed in isolation. They’re built and refined in close partnership with the people who use them – through structured feedback loops involving paraplanning collectives, operational teams and adviser councils. This ensures system updates reflect the day-to-day needs of real users, not just top-down assumptions.

The result? More paraplanners stepping into strategic roles. More client service staff confidently managing client engagement. More team members aspiring to become licensed advisers. These are signs of real cultural shift – not from external hiring drives, but from nurturing the talent already embedded in advice businesses.

A virtuous cycle of professional growth

Magic happens when efficiency gains spark a compounding cycle of talent development.

As support teams build confidence and capability, firms can promote from within and retain valuable institutional knowledge. Paraplanners and client service officers see clear pathways to adviser roles, supported by tools, mentorship and meaningful development opportunities along the way.

This internal progression doesn’t just benefit individuals – it strengthens the entire business.

As more support staff move into advice roles, the adviser pipeline thickens. Mentorship cultures flourish, where seasoned advisers pass down expertise and new advisers bring fresh thinking to client conversations. The result is a richer, more collaborative environment – where experience and innovation feed off each other.

And clients are the real winners – the reason we do this work.

More advisers mean more Australians getting the help they need. And when that growth comes from within – led by people who already know the practice, the systems and the clients – the benefits multiply. Sustainable growth in advice doesn’t come from replacing people with tech but from empowering them to grow, contribute meaningfully and stay in the profession for the long haul.

Looking ahead: closing the advice gap from the inside out

At its core, advice is a human profession. And while technology can help us move faster and scale smarter, it’s the people behind the tools who make lasting impact possible.

The real return on investment comes when businesses commit to a people-first ethos – co-creating solutions with their teams, listening and investing in long-term development. That’s how you transform a static workforce into a vibrant talent pipeline.

Now is the time to build advice businesses that grow from within. Because the most valuable asset we have isn’t the software – it’s the people who use it.

Let’s stop asking if technology alone can solve the advice gap. It can’t. But when paired with a people-first mindset and a commitment to internal growth, it becomes a powerful enabler of the resilient, human-centric advice profession Australia truly needs.

Written by Darren Steinhardt, Founder and Managing Director, Infocus