Adviser-to-client template: A mid-year recap

For financial advisers to use with clients. 

This document is intended to support your service proposition to clients. It is produced by our investment writers with a deliberately light tone and structure. However, these are guidance paragraphs only. It is not guaranteed to meet the expectations of regulators or your internal compliance requirements. If you wish to remove or amend any wording, you are free to do so. However, please bear in mind that you are ultimately responsible for the accuracy and relevance of your communications to clients. 

Dear Client,

As we move through the second half of the year, we’d like to recap what’s happened so far in 2025, and how your portfolios are positioned for the coming months and years.

Much of the market noise this year has centered around volatility, with U.S. President Trump’s tariff measures kicking off waves of turbulence and, at times, sharp market corrections.

But despite that, it’s been a strong year for equities and bonds. Australian equities are up around 8%, with small caps rebounding after underperformance. Globally, we’ve seen strong results out of Europe, while China and emerging markets have had a mixed response, though the reactions to ongoing tariff announcements have muted somewhat. The U.S., on the other hand, has lagged. April was an interesting turning point, with a sharp sell-off followed by a V-shaped recovery.

A new lease on life for the bond market

Over the past seven months, bond returns have sat around the 3.5%-4.5% range, proving more attractive now than they have been for the last 15 years in the aftermath of the GFC. This also means that government bonds are again offering diversification benefits.

A macro view of Australia and the U.S.

Domestically, growth has been weak, and you’ve likely heard that inflation has steadied, with the Reserve Bank of Australia cutting rates this month for the third time since the rate-hiking cycle began and more being anticipated. Unemployment remains low, and while this stability brings reassurance to many Australians, our investment manager Morningstar cautions that there are still some risks to hedge against, including tariffs, geopolitical tensions, and global slowdowns. Overseas, U.S. CPI data is showing similar inflation to Australia, though the future threat of tariffs may see these numbers climb. And, in a move set to mirror many regions, the U.S. Federal Reserve is also expected to cut rates 2-3 times to encourage growth as unemployment edges higher.

Where is Morningstar seeing opportunities?

So what does this mean in practice? Morningstar are seeing pockets of valuation opportunity in emerging markets (Brazil, China, Mexico), which are offering stronger long-term return potential than developed markets. Conversely, at home, Australian banks have seen strong price gains, which leaves less room for future returns. Morningstar has also identified opportunities in some unloved sectors such as US healthcare and consumer staples.

AI is a long-term theme, but at this stage, valuations are high for the bigger tech companies (Microsoft, Meta and Alphabet).  Similarly, there are risks in the supply cycle, such as chip demand, which are making AI less attractive at this point.

Conclusion

As always, Morningstar is taking a long-term view with a strong focus on risk management. They continue to focus on valuations as a guiding principle throughout the volatility, allowing them to build and execute robust portfolios. Diversification, discipline and investor behaviour remain key to navigating uncertainty and staying on track.

If you have any questions about this wrap-up or about your portfolio, please get in touch. I look forward to speaking with you.

Signoff

Important Information

As noted previously, this document is intended to support your service proposition to clients and the commentary does not constitute investment, legal, tax or other advice and is supplied for information purposes only. Past performance is not a guide to future returns. The value of investments may go down as well as up and an investor may not get back the amount invested. The information, data, analyses, and opinions presented herein are provided as of the date written and are subject to change without notice. Every effort has been made to ensure the accuracy of the information provided, but Morningstar makes no warranty, express or implied regarding such information. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or losses resulting from, or related to, the information, data, analyses or opinions or their use

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