Morningstar Quarterly Economic and Market Update - Q1 2025
- Kane Duong
- Jul 25
- 2 min read
Sourced from Morningstar Quarterly Style Monitor (Q1 2025)
The first quarter of 2025 delivered mixed results across global markets, and a notable shift in market leadership. For Australian investors, the message is clear: diversification and strategic asset allocation are more important than ever.
Key Market Takeaways (Jan–Mar 2025)
Global shares declined ~4.8%, driven by a pullback in U.S. tech and growth stocks.
Value stocks outperformed growth — especially in large-cap U.S. and global markets.
Australian equities held up relatively well, with resources and financials helping cushion the fall.
Bonds staged a comeback, with the Morningstar US Core Bond Index gaining ~2.8%, providing defensive ballast.
Developed markets outside the U.S. (e.g. Europe, Japan) returned ~6.4%, outperforming American markets.
Emerging markets rose ~2.2%, boosted by China’s policy support and recovery momentum.
What This Means for Australian Investors
ASX Sector Leadership: Financials and energy stocks performed relatively strongly, in contrast to U.S. growth sectors like tech and communication services.
Currency Impact: The Aussie dollar weakened slightly against the U.S. dollar, which gave a small boost to unhedged international investments.
Value Rotation in Play: After years of growth dominance, undervalued sectors (like banks, insurers, energy) showed strong relative returns.
International Diversification Paid Off: Portfolios with exposure to Europe, Japan, and emerging Asia outperformed those overweight the U.S.
Performance Summary – Q1 2025
Asset Class / Index | Q1 2025 Return |
Australian Equities (ASX 200) | Approx. flat / mildly positive |
Global Equities (unhedged, AUD) | ↓ ~4.8% |
U.S. Large Growth (unhedged) | ↓ sharply |
U.S. Large Value (unhedged) | ↑ ~11.8% ahead of growth |
Developed Markets ex-U.S. | ↑ ~6.4% |
Emerging Markets | ↑ ~2.2% |
Bonds (US Core Index) | ↑ ~2.8% |
Australian Dollar (vs USD) | Slightly lower |
Source: Adapted from Morningstar Quarterly Style Monitor – Q1 2025
