Why the ASX has been a global laggard in 2025

Our market, by contrast, has a distinct old-world feel. Financial firms (mostly banks) make up almost a third of the index, while miners make up the other 20 percent.

Many of these companies have been around for decades (Fortescue is a relatively new mining powerhouse) and are generally viewed as very solid “blue chip” investments. While our banks reliably produce strong profits and dividends, miners are more volatile, but if global growth – especially in China – is strong, they tend to do well.

The ASX has some technology businesses, but overall they are quite modest: information technology is only 3 per cent of the ASX 200.

Does the lack of high-flying tech stocks and the outsized role of miners and banks really matter?

This means that while financials are still pretty good (up about 4 percent this year) and materials are up more than 20 percent, our market is getting much less of an impact from the boom in AI. But super funds, which now have more of their money in overseas shares than in Australian shares, are still expected to achieve returns close to their long-term averages this year.

Being a little cumbersome when investing isn’t always bad either. It can be useful in turbulent times because money will flow into safe havens, as it did during Donald Trump’s “Emancipation Day” this year.

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Morgan Stanley Australia equity strategist Chris Nicol said earlier this year our market had outperformed at a time when investors were becoming more risk averse. In this type of environment, higher-priced banks may look more attractive to a global investor looking to put their money somewhere less exposed to Trump’s policies.

But as investors have since re-embraced risk, they have tended to push other countries’ stocks higher than ours.

Aside from investor sentiment, experts say there is another simple reason why our market is weak: Australian companies are making less profit. This likely reflects weakness in China, our largest export market, as well as an economy struggling to recover from cost-of-living woes. AMP chief economist Shane Oliver said the market’s earnings per share had been soft over the last three financial years.

Matt Sherwood, head of permanent investment strategy, says earnings per share growth forecasts for next year are also quite soft for the ASX, but share prices remain relatively high. “The Australian share market is expensive relative to its history and comparable markets such as the US and Europe,” he says. “You pay high prices for low earnings growth.”

A similar debate is playing out over individual stocks this year; especially CBA, which is the largest in the market. Of course, it is a well-managed bank. So is it really worth the $300 billion valuation it reached earlier this year? Given that CBA shares are down nearly 20 percent from their peaks, many in the market seem to think there is better value elsewhere.

The CBA share price debate this year has also reignited a long-running debate about whether it is a good thing that so much of our stock market is heavily concentrated in a handful of giant companies, such as banks and miners, each exposed to risks specific to their respective sectors.

Although it has been a less stellar year for the ASX than other markets, some believe it is time for us to rebound. UBS strategist Richard Schellbach last week predicted 2026 would bring the strongest earnings per share growth for the ASX200 in four years, helped by stronger profits for miners.

Moreover, if Wall Street turns out to be caught in an AI bubble, as some fear, there’s an argument to be made that our solid, if somewhat unexciting, stock market would be better off.

Schellbach says this is what happened after the tech crash of the early 2000s, when Wall Street crashed but the ASX experienced a much more modest decline. Sometimes the mining and banking-heavy ASX can beat its tech-heavy peers; However, this was not the case this year.

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