As we navigate the complexities of the financial landscape, it’s important to stay informed about how investment markets are performing. The fourth quarter of 2025 (October 1 – December 31) presented both challenges and opportunities for investors. In this article, we take a closer look at how investment markets performed over the quarter, and we highlight some of the key economic factors from across the world, that influenced these outcomes.
Australia
Share market: The Solactive Australia 200 Index, which represents Australia’s top 200 companies, was down -1.0% over the quarter. Positive returns from the mining sector, including companies such as Rio Tinto and Fortescue, were offset by negative performance from Technology, Health Technology, Finance and Retail companies.
Interest rates: Australia’s inflation rate rose to 3.8% in Q4 2025, up from 3.4% in Q3 and was above the Reserve Bank of Australia’s (RBA) target range of 2-3%. Core inflation, which excludes volatile items like food and energy, rose from 3.0% in Q3 to 3.4% in Q4 2025. The RBA kept the cash rate at 3.60% through Q4 after lowering it from 3.85% in August. Following the hotter-than-expected inflation numbers, markets are no longer expecting any further rate cuts in this cycle, but are instead expecting possible rate hikes in early 2026.
Housing market: The Australian housing market, as measured by Cotality's Home Value Index (HVI), recorded an increase of +2.7% in Q4 2025, following a similar +2.7% increase in Q3 2025. The increase over the whole of 2025 was +8.3%. The strong growth in 2025 has been attributed to a combination of factors that include housing supply shortages, population growth driven by immigration, along with falling interest rates, which have acted as a catalyst for renewed momentum.
Australian dollar: The Australian dollar (AUD) continued to recover against the US dollar over the quarter, rising 0.6% from 66.1 to 66.7 cents. The continued recovery is due to factors such as improved global risk sentiment, along with stronger inflation and economic data in Australia that has substantially reduced the chance of further interest rate cuts in Australia.
New Zealand
Share market: The Solactive New Zealand Top 50 Index saw a +2.1% rise in Q4 2025, with the positive return due to strong performance in Auckland International Airport and the a2 Milk Company, a leading exporter of milk-related products.
Housing market: The QV House Price Index showed no change in house prices nationally in the three months to the end of November 2025. House prices are now 0.1% higher than the same time in 2024, and 13.4% below the market peak in January 2022. The average property value nationally is now NZ$907,274.
Interest rates: The official cash rate was reduced from 3.0% to 2.5% in October 2025, with another cut to 2.25% in November 2025. It appears likely that this marks the bottom of the interest rate cycle for New Zealand, with the next move possibly being a hike sometime in 2026 depending on future inflation results. New Zealand’s economy, which saw a contraction in Q2 2025 of -1.0%, saw an increase of 1.1% in Q3 2025. Inflation was 3.0% in Q3 2025, slightly higher than the 2.7% recorded in Q2.
United States
Share market: US stocks had a modestly positive quarter, although they lagged international stock markets. The US stock market was held back by the record-long US government shutdown, rising job cuts and weakening consumer confidence.
Interest rates: The Federal Reserve cut interest rates from 4.25% to 3.75% in Q4 2025. This is in line with the Fed’s goals of achieving maximum employment and price stability. The Personal Consumption Expenditures (PCE) inflation rate stood at +2.8% at the end of September, while core inflation was at 2.6% at the end of November 2025.
A review of 2025
Financial markets saw continued positive returns through Q4 2025, rounding off a year of strong positive returns across all major asset classes. The strong returns of 2025 came about despite a stream of negative news, geopolitical and economic uncertainty and trade tensions. While US stocks saw strong performance through 2025, International stock markets and Emerging Market stock markets in particular saw very strong returns throughout the year, with Emerging Markets rising over 20%. Bond returns were positive through the year, although more muted than stock market returns.
We continue to monitor the major drivers of markets and their impact on Resolution Life Australasian portfolios. While investing always involves managing uncertainty, the current environment is mired in elevated uncertainty. The best form of defence for portfolios is to continue to be well diversified, with exposure to a range of asset classes that can help during volatile times.
Sources:
1. Solactive Australia 200 Index Performance - Solactive
2. Solactive New Zealand Top 50 Index Performance – Solactive
3. Reserve Bank of Australia Monetary Policy - RBA
4. Reserve Bank of New Zealand Official Cash Rate - RBNZ
5. Australian House Prices – CoreLogic Home Value Index
6. NZ house Prices – QV House Price Index
7. FactSet
8. Trading Economics
Important information
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