Making sense of the year so far & what’s ahead
Having just gone past the halfway mark of 2025, it’s a great time to reflect on what’s unfolded economically, and more importantly, what it could mean for your financial future. Like you, we’ve been keeping a close eye on the markets, global events and the key policy shifts that are shaping the year.
In this update, we’ll walk you through the standout moments of the first half of the year, then take a look at what might move markets next. Plus, we’ll share a few practical tips to help you stay steady through the uncertainty and make confident financial decisions going forward.
A Look Back: The First Half of 2025
Markets on a wild ride
The start of 2025 was anything but quiet. In April, the U.S. government shocked the world by slapping new tariffs on nearly all imported goods—what some dubbed “Liberation Day.” Investors were rattled. Global stock markets took an immediate hit, with the biggest drop since 2020.
But just like the fable of “the boy who cried wolf,” markets quickly adjusted. Tariff talk softened, trade negotiations resumed, and the S&P 500 bounced back to finish the financial year in record territory by late June. Australian shares followed the lead, helped by easing inflation and solid commodity exports.
Inflation eases, but rate cuts on hold
At home, inflation finally settled back within the Reserve Bank of Australia’s target range-sitting around 2.4% headline and 2.9% core in the March quarter. After several years of price pain, that’s a welcome shift.
Despite that, the RBA chose to keep interest rates steady at 3.85% in July. Why? The labour market is still strong, with unemployment only slightly ticking up to 4.3%. The RBA is watching closely, ready to act, but not in a rush.
Political & policy moves
Australia’s federal election earlier this year saw Labor secure a comfortable majority. That result gives the government a clear mandate to pursue economic reform. Key business groups are urging bold action on tax, productivity and spending reform.
The upcoming August Reform Summit will be one to watch. If the government can deliver meaningful reform, it could have long-term positive impacts on investment, confidence, and growth.
Global growth holding—for now
Globally, growth remains modest. The world economy is tracking at about 2.7% annualised, but that’s expected to slow in the back half of the year.
The reasons? A mix of tighter financial conditions, U.S.-China tensions and uncertainty around ongoing trade deals. Asia, in particular, has seen its growth outlook revised lower, especially as China’s property market continues to drag.
What’s Ahead: Themes to Watch in the second half of 2025
Trade policy still the big unknown
The recent agreement between the U.S. and European Union-introducing a new 15% tariff arrangement brought a sigh of relief. It helped avert a full-blown trade war. But it’s not all smooth sailing yet. Implementation remains tricky and new tensions could pop up at any time.
Markets will remain ultra-sensitive to any trade news in the coming months. A breakdown in talks or a flare-up with China could quickly change sentiment.
Central banks treading carefully
Globally, central banks are taking a cautious approach. The U.S. Federal Reserve has hinted it may hold rates for the time being, waiting for more consistent signs that inflation is truly under control. Europe and Japan are in a similar “wait-and-see” mode.
Here in Australia, the RBA may look to cut rates this month as inflation is now in their preferred band but focus will now shift to the jobs market and any further signs of softness. For now, expect at least one rate cut but continued caution with an eye on inflation and wages.
Market valuations: high and hopeful
One of the big concerns for investors? Market valuations are looking expensive. Much of the recent rally, particularly in the U.S. has been powered by AI and tech optimism. That means earnings will need to catch up to support those prices.
If companies fail to deliver on earnings growth, or if economic data weakens, we could see some wobbles in share markets later this year.
Domestic reform & productivity
Australia’s long-term outlook could hinge on whether the government seizes the moment for reform. With a strong mandate and a stable majority, there’s a real opportunity to drive improvements in tax policy, housing supply, and workforce productivity.
If successful, these reforms could not only support growth but also attract investment and boost business confidence. If missed, we could see stagnation and slower economic momentum into 2026.
What It Means for You
If the first half of 2025 has taught us anything, it’s this – stay focused on what you can control. Markets will always move up and down. Trade headlines will come and go. But your financial plan should stay anchored to your goals, not the noise.
Here are a few practical steps you can take to stay on course:
Consider fixed income opportunities
If rates do start to come down later in the year, high-quality bonds and income-focused investments may offer attractive returns.
Keep some liquidity on hand
Market pullbacks can create opportunities. Having a cash buffer or liquidity in your portfolio gives you flexibility to act when prices are more favourable.
Revisit your goals
Have your goals changed? Are you planning a big lifestyle shift-like a career change, sea change, or semi-retirement? Now’s a great moment to reconnect with your priorities and make sure your financial plan still lines up with where you want to be.
In summary
2025 has delivered its fair share of curveballs, but also some strong recoveries. The outlook for the rest of the year is mixed – cautious optimism tempered with realism.
What matters most is that your plan is built to weather all conditions. As always, we’re here to help you interpret what the data means, navigate complexity and make thoughtful choices that support your long-term wellbeing.
Andrew Aylward is Chief Investment Officer at Keep Wealth Partners.
For more information contact us on 03 8610 6396
Keep Wealth Partners Pty Ltd (AFSL 494858)
This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from a financial planner who can consider if the strategies and products are right for you.
