June In Review: Another Double-Digit Year

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June capped off a stellar quarter performance as the ASX200 delivered a surprisingly strong FY25 total return despite tariff, trade and geo-political headwinds, and weaker earnings.

-Multiple expansion drives ASX gains with banks the standout in FY25
-Spread between Financials and Resource stocks widened
-Large cap stocks did the heavy lifting in June
-Historically, July is the second strongest month for the ASX

By Danielle Ecuyer

A bird’s eye view of fiscal 2025

The financial year past has been quite the roller coaster ride for equity markets and investors, not least of which was the brutal -19% drawdown in the S&P500 resulting from President Trump’s shock Liberation Day tariffs in April.

The ASX200 and global markets were not immune to the risk-off selling as hedge funds scrambled to re-position for a changing global trade order and the prospect of higher inflation for the USA in combination with slowing global growth, led by China.

FY25 had started strongly after a surprisingly robust FY24 performance for the ASX200, generating 12.1% in total return or 7.8% in capital appreciation ex-dividends.

The August 2024 reporting season was buoyed by robust dividend announcements and September saw a rotation out of Banks and into Resources on the prospect of a major Chinese stimulus package (that ultimately, just like Godot, never arrived).

Markets rallied post President Trump’s victory in November and the ASX200 hit an all-time high in January of 8532.30, with domestic investors starting to discount an RBA rate cutting cycle from February.

As of June 30, 2025, the ASX200 closed out at 8542.30, surpassing the January high by 10pts and coming in below the record intra day high of 5839.10pts on June 11. It transpired into a surprisingly strong year, another double-digit appreciation ex-dividends of 10.2% for FY25.

The ASX200 advanced 1.4% in June pushing total return to 13.8% on FY24. The June quarter printed an impressive total return of 9.5%, underpinning the highest financial year return since 2021 for the index.

UBS points to the ASX200 under-performing the S&P500 and Global Emerging Markets indices which advanced 5.1% and 5.3%, respectively in June. It is worth noting relative returns look a whole lot different when currency adjusted.

While year-to-date the S&P500 is up 5.38% in US dollar terms, in Australian dollars the return is down -0.73%. Food for thought for Australians investing in USD assets, unhedged.

Investors took the lead from offshore with the S&P500 staging the fastest recovery from a -15%-plus sell-off, exceeding the covid recovery rally in April 2020.

Retail investors in particular were quick to sniff out the emerging ‘TACO’ trade, the coined phrase, Trump Always Chickens Out, to position for a much more workable level of tariffs.

Valuations gain versus weaker earnings

Back home, much of the market gains were underpinned by multiple expansion, estimated by Macquarie at some 10ppts. Wilsons points to a forward multiple on the market of 18.8 times, above the five-year average of 16.7 times.

Notably, the return was achieved despite what Wilsons refers to as a “weak” earnings period for the market with the average EPS for the ASX200 looking set to decline by -1.4% for FY25. More will be revealed at the upcoming August reporting season, which will be covered extensively by FNArena.

Macquarie notes earnings presented a -3ppt headwind to the market’s returns. Much of the sectoral performance was reflected in earnings downgrades or upgrades for the year.

The Resources sector was the greatest drag with cuts in earnings of -14.9ppts as Trump’s tariffs weighed on China’s exports and growth while global GDP expectations were downgraded.

Banks and gold shine in FY25

Gold miners were a standout performer in FY25, rising nearly 60% and exceeding the 41% price appreciation in the precious metal.

Improved sentiment around the domestic gold miners, post a period of rising costs and travails, and boosted by a favourable forex rate up until the June quarter, resulted in major investor flows into the sector. Profit taking arrived in June, with the sector falling -9.4% throughout the final month. Evolution Mining ((EVN)) shares rose 127.7% for FY25, delivering a top 10 contribution to ASX200 performance.

A flat iron ore price for the year led to a -2.3% decline in Materials and a fall in Brent of -21% resulted in Energy declining -8.1% in FY25, despite the latter sector being the best performing in June, up 8.9%. Middle East conflicts drove up the Brent oil price by 6.3%. A takeover offer for Santos led to a 16% rise in the share price over the month.

In terms of positive earnings contributions, Technology added 19ppts and Telecom 15ppt, as highlighted by Macquarie, with InfoTech and Communication Services advancing 24.2% and 27.8%, respectively over FY25.

Dividends from Telecom and Utilities contributed 3.8ppts to FY25’s total return; both sectors offered the highest returns from dividends in FY25. Utilities rose 6.2ppts, Telecom up 6.1ppts.

Financials were the star performers in FY25, up 29.4% and 4.3% in the June quarter.

Morgan Stanley explains Financials added 921bps to FY25’s ‘value’ performance, with Banks at 696bps and CommBank at 457bps alone, the largest single stock contributor.

Financials generated more than 50% of the ASX200 total return of 9.5% for the June quarter.

CommBank ((CBA)) was undeniably the stand-out stock performer in FY25, much to the chagrin of analysts’ valuation assessments and domestic institutions.

CommBank is now the largest stock on the ASX200, commanding 12% of the index, up 2.8ppts or a 31% rise in its index weighting, Macquarie observes.

Morgan Stanley points out the average bank price-to-earnings valuation rose in June to a new record high of around 20.4 times. Across all the banks, small cap Judo Bank ((JDO)) rose 9.8% after declining -20% in May post a 3Q25 trading update.

In contrast, BHP Group’s ((BHP)) index importance declined by -2.1ppts, CSL’s ((CSL)) went down -1.7ppts. Remarkable: CSL’s EPS contribution of 7ppts compares with CommBank’s 11ppts, suggesting a disproportionate de-rating for Australia’s premier bio-tech.

The spread between Financials and Resources in index weight increased by 7.4ppts in FY25, to 15.8%. According to Morgan Stanley, this is the largest gap since 2016. Of course, this gap has experts questioning when the big switch will commence?

In FNArena’s month of September 2024 in Review, it was noted “Banks had outperformed the Resources sector by up to 60% year-on-year, but by September’s close, this gap had narrowed to 37% (illustrating just how fierce the switch between the two local heavyweight sectors has been)” as investors discounted the China stimulus.

Banks in general contributed 5.3ppts in terms of dividends, although UBS is one of a few brokers flagging the potential for banks’ dividends to come under pressure and be cut.

Other large cap stocks that contributed to the stellar June quarter performance include Westpac Bank ((WBC)) up 9.9%, Wesfarmers ((WES)) up 17.7%, Telstra ((TLS)) up 15%, National Australia Bank ((NAB)) up 18.5%, and CommBank up 22.4%.

Industrials and Discretionary sectors contributed 176bps and 153bps of value to the ASX, with Brambles shares rising 66% over FY25 and 16.9% in the June quarter.

At an index level, REITs might not look so flash, up 14% for FY25, but UBS highlights the sector achieved a 1.8% return in June, outperforming both the ASX200, as well as the 1.3% from Global REITs in USD terms.

Much of the positioning and performance can be explained by investors positioning for the RBA rate cutting cycle, with Charter Hall ((CHC))shares  up 76.6%, Vicinity Centres ((VCX)) up 40.9%, and Stockland Group ((SGP)) rising 34.8% in FY25.

As explained by Macquarie, Growth stocks outperformed Value stocks by 10ppts in FY25 largely attributed to Value’s exposure to Resources, while Momentum outperformed Value by 12ppts.

Large caps outperformed small caps although that margin has narrowed to 1.4ppts.

What’s on the horizon

Over the last ten years, July has been the second-best month for ASX equity returns, just pipping out November.

According to analysis by Macquarie, trading action in July tends to tilt to stocks with weak momentum and high volatility such as IDP Education ((IEL)), Flight Centre Group ((FLT)) and Ramsay Health Care ((RHC)), likely as a follow-on from tax loss selling in June.

Low-risk momentum stocks such as CommBank, Wesfarmers and TechnologyOne ((TNE)) often underperform in July.

Macquarie also highlights the ASX200 price-to-earnings multiple remains high at 18.9 times, which is two standard deviations above the historical average of 14.7 times. The 10-year average multiple is 16.1 times.

The market’s dividend yield has declined to 3.4%, below the historical average of 4.4%, and the broker believes earnings continue to be “challenged”.

Wilsons views the macro backdrop as supportive of better earnings growth for FY26 with three RBA rate cuts slated in 2025 to support economic growth. Two rate cuts are already in place.

Consensus earnings growth for the ASX200 is 5.4% for FY26, with some sectors flagged to do the heavy lifting: Healthcare forecasts are pointing towards 19% growth, with IT companies projected to grow earnings by 14%.

The Healthcare sector went backwards by -4.6% in FY25, a trend which was equally evident in US markets. Three years after covid-lockdowns, some local sector analysts are preparing for the sector’s comeback.

Might FY26 be that year?

ASX100 Best and Worst Performers of the month (in %)

ASX200 Best and Worst Performers of the month (in %)

ASX300 Best and Worst Performers of the month (in %)

ALL-TECH Best and Worst Performers of the month (in %)

All index data are ex dividends. Commodities are in USD.

Australia & NZ

The World

Metals & Minerals

Energy

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