August Monthly Global Financial Update

We are past the halfway mark for 2025, and for those in the Southern states, there are a few more weeks to go before the delights of the spring season are upon us. Overall, domestic and international economies are performing reasonably well. There is ongoing speculation about what the US will do next; however, there is a slight shift toward more confidence as the year goes on.

Domestically, Australian retail sales rose 2.1% June from the May number. This was a much bigger gain than the 0.4% economists expected. This was attributed to aggressive mid-year sales, especially on household goods. The RBA kept interest rates unchanged even with inflation easing slightly. Most analysts expect the RBA to cut rates at its August meeting.

The US service sector returned to growth in June. The ISM services index climbed back above 50, and retail sales were up 0.6% for the month, above the 0.1% forecast. The Federal Reserve left interest rates unchanged, but trade policy is still a key concern.

The Trump administration announced new tariffs on imports from Europe, Japan, and India. These tariffs were not as high as anticipated, yet they could dampen economic activity and corporate profits in the coming months. Overall, the US economy continues to expand moderately, and consumer spending is up. The labour market remains strong, though job openings have started to lag, but only slightly.

Germany continues to shine in the European economies, with sentiment improving in July. The UK is under pressure, and inflation rose to 3.6% in June, its highest level since early 2024. Across Europe, growth is proving to be static and hard-won. The US tariffs are not helping the region.

The Japanese manufacturing sector broke its confidence decline for the first time in the past two quarters, a positive sign for its industry. However, the Chinese factory slipped further into contraction, and the manufacturing PMI fell to 49.3 despite Beijing’s stimulus efforts. Despite Japan’s improvement, China’s slowing and trade uncertainties negatively affect the region.

Inflation is showing signs of easing, and corporate earnings have been steady. Our analysts forecast that global growth will continue at a modest pace. However, the markets will likely remain volatile due to the persistent uncertainty of trade tariffs.

We have positioned our clients for a tilt toward growth stocks and kept cash on hand to ensure flexibility. While we don’t anticipate a severe downturn, if the economy does weaken, we will shift to a defensive position to protect your capital. If growth does accelerate we will be in a position to take a more aggressive position toward growth assets that are best placed to take advantage.
As always, if you have questions or want to review your strategy, I’m here to help.

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