News & Insights

2025 was a mixed year in Australia. The ASX200 delivered 10.3% despite moments of elevated volatility in April and November. On a macro level, there are signs of green shoots and an uptick in growth but off a very low base. In the post-COVID years it has been an economy reliant on government spending with the public purse propping up growth. In fact, without the spending of government in 2024 Australia would’ve been in recession as the private economy faltered. The good news is in 2025 GDP growth accelerated on the back of the private sector returning to life.

The cloud at the centre of the expanding AI universe US equity markets remain expensive on almost any conventional measure, and a single cluster of companies explains why. Valuations continued to persist throughout 2025 with numerous companies achieving repeated record highs. The chart to the right, showing the market capitalisation of a handful of companies colloquially known as the ‘AI8’ surging to over two times their July 2023 values and far ahead of the remainder of the S&P 500 index, illustrates how much of today’s valuation premium is concentrated in a handful of AI-linked firms. They aren’t leaving the index behind… they’re dragging it along.