Despite a sharp correction in global equity markets in the first few months of 2025, the returns of the MySuper investment options in the last financial year were generally higher than would be expected over the long term. For example, the median return from the SuperRatings MySuper Index cohort over this period was 10.5%, versus 7.2% per annum over the 10 years ending 30 June 2025. This article briefly considers the equity market performance during the financial year, key developments and outlook. You can view the latest returns here.
Equity Market Performance
Equity market performance was a key driver of the generally favourable returns from MySuper investment options in the last financial year. The chart below shows that some of the major equity markets and the Australian equity market experienced moderate to strong price gains over the 12 months to 30 June 2025. The performance from the Australian equity market (ASX 200) was not as strong as either the German (i.e. DAX) or US market (i.e. S&P 500) but was still favourable.
Key Developments During the Financial Year
The financial year can be divided into two distinct periods which are separated by Donald Trump’s inauguration on 20 January 2025. In the lead up to the inauguration, the performance of equity markets was generally favourable, including in the period immediately after the US election in November 2024. During that period, equity markets performed strongly, anticipating that Trump would introduce pro-growth policies to boost profits.
The favourable period for equities was relatively short-lived, with a negative outlook commencing soon after Trump’s inauguration, mainly reflecting announcements related to US trade policy. This culminated in the US administration announcing very onerous “reciprocal tariffs” on 2 April. This caused equity markets globally to fall very sharply until 9 April when the administration announced a 90-day pause in the implementation of the proposed tariffs for most countries. This marked the low point in global equity markets in the first half of 2025.
Despite US macroeconomic growth data generally weakening and surprising on the downside during much of the first half of 2025, global equity markets rose from the date of the announced 90-day tariff pause. By the end of the June, equity markets had regained most of their prior losses and in some case made new highs. Implicitly, markets are now pricing a moderate impact of tariffs on the US and global economies.
In the US, a key driver of the recent rally has been the mega-cap stocks most closely linked to artificial intelligence (e.g. NVIDIA). The valuations of these stocks are generally very elevated, with investors expecting strong earnings growth.
The US equity market has been very resilient over recent months. For example, there was very little impact from either the Israel/Iran conflict or the US becoming involved in the conflict.
In the first half of the last financial year, the US Federal Reserve (the Fed) was reducing interest rates at a moderate pace. With the introduction of a material increase in US tariffs in 2025, the Fed has paused its interest rate cuts, waiting for more evidence of the impact of the higher tariffs on the economy.
The performance of the Australian equity market during the last financial year has been strong despite lacklustre profits growth. The main driver of the performance has been valuations rising to relatively elevated levels. The banking sector, particularly Commonwealth Bank of Australia, was responsible for a significant increase in the ASX 200.
The Australian economy was relatively sluggish in the last financial year, growing at a pace well below its capacity. Falling inflation has allowed the Reserve Bank of Australia to cut interest rates, which should help to boost growth with a lag. Markets are currently pricing further cuts later this year.
Outlook
US policy has been an important influence on global financial markets during 2025 so far. The full impact of the tariff increases will take time to be realised. A key issue in that context is the extent of increase in US inflation. Markets are currently pricing a moderate increase that subsides during 2026 and 2027. Such a profile is expected to result in the Fed re-commencing cutting interest rates in the second half of 2025.
Along with US policy, AI developments are likely to be important for economies and the investment environment outlook. In general, investors are expecting a meaningful increase in productivity and strong growth from AI-linked companies.
Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
Issued by Vision Super Pty Ltd ABN 50 082 924 561 AFSL 225054. This information is general advice which does not take into account your personal financial objectives, situation or needs. Before making a decision about Vision Super, you should think about your financial requirements and consider the relevant Product Disclosure Statement and Target Market Determination
