Australian stocks underperformed global peers in 2025
There are two ways to look at the performance of the Australian stock market in 2025: half full or half empty.
As of Tuesday afternoon, the ASX200 was on track to return 6.7 per cent for the year, or 10.3 per cent when dividends are included.
However, the performance of the local stock market was its worst since the 2022 loss and also underperformed compared to the stock markets of many other developed countries.
While the US’s S&P500 index was on track to gain 17.4 percent in 2025, similar indices of the UK, Japan, Germany, Canada and Hong Kong, as well as the global indicator known as the MSCI World Index, were on track to gain more than 20 percent.
One of the few markets where the ASX200 was likely to outperform was New Zealand, where the NZ50 was up 3.1 per cent.
Moomoo market strategist Jessica Amir said relative metrics showed Australians needed to invest beyond their local market.
“Australians would do well to seriously consider why they are not exposed to the NASDAQ 100 and consider being a bit more visible,” Ms Amir said.
“Because the world’s largest companies are investing heavily in AI, they are leading the world and developing AI, and they are the biggest beneficiaries of the development of AI, which is a multi-trillion-dollar industry.”
The NASDAQ 100, which increased by 21.5 percent throughout the year as of Tuesday, includes technology giants such as Amazon, Meta, Microsoft and Alphabet, as well as automobile manufacturer Tesla.
“If you stay boring and complacent and stay in the ASX200 you’ll probably get another year of mediocre returns,” Ms Amir said.
But Ms Amir added that the Australian market offers some opportunities, including ways to play the AI trade, such as investing in companies that extract critical minerals needed to build AI.
“I won’t say BHP, most of their money is from iron ore, but they make a lot of money from copper and a small amount from gold,” he said.
“You could be looking at other pure copper companies, platinum, palladium and silver.”
There are also exchange-traded funds, such as Aberdeen’s GLTR, that offer exposure to a basket of physical metals gold, silver, platinum and palladium, Ms. Amir said.
Rory Hunter, head of emerging and smaller companies at boutique Australian investment manager SG Hiscock & Company, has a similar view.
“The opportunity in critical minerals today is one of the most compelling themes we see anywhere in global markets,” he said.
“The structural drivers behind this are strong and we expect this to continue in the coming years.”
Small-scale gold and critical mineral miners, many of whom are listed on the ASX, should benefit from growing AI investment and energy transition needs, he said.
“If you look at global trends, the magnitude of AI-related capital expenditure and the structure of energy generation and transmission required to support this, the demand profile for key commodities such as copper, silver, uranium and a suite of more niche critical minerals is becoming increasingly stronger.”
Mr. Hunter noted that China is increasingly weaponizing its supply of critical metals, adding to the dynamic.
But Mr. Hunter was less optimistic about the outlook for small industrial companies, which he said were facing the negative effects of rising interest rates.
Another trend for 2025 was the remarkable performance of defense-related stocks amid wars in Ukraine and Gaza and tensions and hostilities elsewhere.
ASX’s Droneshield would end the year up more than fourfold despite a sell-off in October and November; This means it will deliver the best performance of any company on the ASX200.
Fellow defense contractor Electro Optic Systems, an ASX300 constituent, is up sevenfold for the year and shipbuilder Austal is also up 115 per cent.
In the United States, military contractor RTX Corp, formerly known as Raytheon, grew 59 percent, while Palantir Technologies was on track for a 145 percent increase in 2025.
“Frankly, it’s the largest software defense company in the world,” Ms. Amir said of Palantir, which was co-founded by controversial tech billionaire Peter Thiel.
“Yes, they are variables, so yes, people will love to hate them. They break up because quality companies are not immune to pullbacks, but as we know, smart investors buy pullbacks.”
After Droneshield, the ASX200’s top gainers for 2025 are lithium developer Liontown (207%), followed by five gold miners: Genesis Minerals, Catalyst Metals, Evolution Mining, Newmont Corp. and Capricorn Metals.
On the other hand, IDP Education, Telex Pharmaceuticals, Treasury Wine Estate, Guzman Y Gomez and Wisetech Global were the worst performers on the ASX200, with losses of 54.3 to 43.8 per cent.
