Australian shares have continued to climb in 2025, with T. Rowe Price forecasting a supportive near-term outlook for local equities amid rising global trade uncertainty and market volatility.
In its newly released 2025 Midyear Market Outlook, the global investment firm has highlighted Australia’s unique positioning as both defensively shielded and economically resilient in the current environment.
Tom Shelmerdine, sector portfolio manager in the equity division, pointed to Australia’s limited exposure to new US tariffs as a relative advantage, and its strong ties with China through commodity exports.
“Australia is by no means immune to global trade uncertainty, but we see it as being relatively defensively positioned in the near term.
“Australia has low direct exposure to US tariff policy; rather, it is wholly dependent on China through commodity exports and therefore could benefit from any countercyclical domestic stimulus response from China,” Shelmerdine said.
He noted that domestic conditions are supporting equity performance as the Australian domestic economy proves “resilient with a ‘Goldilocks’ backdrop of ongoing fiscal spending and a supportive monetary easing cycle.”
“This all suggests tailwinds for Australian stocks, which are back to all-time highs,” he added.
However, Shelmerdine warned that long-term challenges remain as the structural downturn in commodity export revenues, alongside associated fiscal pressures, would lead to pressure on the Australian dollar.
“For now, however, the backdrop looks supportive,” Shelmerdine said.
T. Rowe Price’s broader equity outlook points to an evolving landscape, with market leadership moving away from the US and mega-cap tech stocks that have dominated in recent years.
Josh Nelson, head of global equity, said the trend towards diversification is accelerating in response to trade policy shifts and political developments.
“An expanding opportunity set in stock markets was on its way prior to last year’s US presidential election; the trade policies implemented since then have merely sped up the process.
“We believe this will lead to an expansion of investable stocks in the US and abroad,” Nelson said.
He added that investors are now operating in a broader market where more sectors and regions offer strong returns, making diversification and active management increasingly important.
“The broadening of equity market leadership is likely to favour value stocks and select emerging markets.”
However, the report cautioned that the global economy remains under pressure, with geopolitical and trade dynamics reshaping investment conditions. Blerina Uruçi, chief US economist at T. Rowe Price said that recent US trade actions could have widespread consequences.
“The US administration’s tariffs – combined with any retaliatory measures from its trading partners – will deliver a supply shock to the US and a demand shock to the rest of the world, including China and Europe,” Uruçi added.
She warned that the outcome of trade negotiations and legal challenges will be key, and that US and China will seemingly experience lower economic growth than what was projected at the beginning of 2025.
“...the ramifications of this will be felt across the globe, irrespective of any individual trade deals struck.”
