Quarterly Investment Update

The index returns quoted below are for the period ended 31 March 2025, sourced from Morningstar.

Following back-to-back years of very strong performance, shares recorded their first quarter of negative returns for some time. This was partly attributed to a reset of high valuations – which is a normal part of market cycles – and some emerging concerns regarding geopolitical stability and the outlook for economic growth.

Some of our key takeaways from this quarter and the outlook for the period ahead are summarised below:

• Australian Shares returned -2.8% during the quarter, taking the 1-year return to +2.8% and the 5-year return to +13.2% per annum
• International Shares returned -2.4% during the quarter, taking the 1-year return to +12.3% and the 5-year return to +15.8% per annum

Markets retreated during the quarter as political uncertainty reached fever pitch. Potential tariffs being implemented by the US Government caused widespread uncertainty which weighed on markets. Trump initially targeted neighbouring countries Canada and Mexico with tariff threats, before targets became more widespread. This is a fluid situation which we are continuing to monitor closely.

A common theme in markets over 2023 and 2024 was the artificial intelligence (AI) wave that led a select group of US technology companies to dominate and dictate share market performance. This trend reached a speed bump during this quarter, with the release of DeepSeek, a Chinese AI product that was allegedly built with just as much power as other incumbent products at a fraction of the cost. Notably, Microsoft and Google both announced a reduction in their projected AI-related spending over the coming years.

As always, we believe the best approach for our clients is to:

• Invest in a portfolio of high-quality assets with diversification among asset classes, geographies and sectors
• Retain sufficient cash and defensive assets to ride out short-term volatility and take advantage of opportunities as they arise
• Stay invested for the long-term and seek to benefit from some wise tactical decisions along the journey

For now, the short-term direction of markets will likely continue to be driven by shifts in sentiment and the future direction of government policy. However, we believe those who remain invested in high quality assets and make some smart tactical decisions along the way will be rewarded in time. We will continue to monitor markets closely and make adjustments to our client’s portfolios as deemed appropriate.