The Australian share market moved higher in June as memories of “Liberation Day” receded. Most sectors finished in the “green”, with financials (and in particular CBA) starring. Year to date, the market is up 4.7% and with dividends included, 6.4%.
Our model portfolios finished higher in the month. Year to date, the income portfolio continues to outperform.
At the beginning of the year, we updated our portfolios for 2025. There are two model portfolios – an income oriented portfolio and a growth portfolio. The objectives, methodology, construction rules and underlying economic assumptions can be referenced here [1].
These are long-only model portfolios, and as such, they are assumed to be fully invested at all times. They are not “actively managed”, although adjustments are made from time to time.
In this article, we look at how they have performed so far in 2025. To do so, we will start by examining how the overall market has fared.
Financials star, while materials lag
The tables below show the performances in June and calendar 2025 year to date of the components (large cap, mid cap, small cap etc.) and the industry sectors that make up the Australian share market.
Within the components (see table below), the variation in performance between “big caps” and “small caps” is relatively small. Small caps (as measured by the S&P/ASX Small Ordinaries index) are doing marginally better than big caps. The best performing part of the market is mid caps, as measured by the Midcap 50 index. It tracks stocks ranked 51st to 100th by market capitalisation and is up 7.2% in 2025 (compared with the S&P/ASX 200 return of 6.4%).
With the industry sectors (see table below), all sectors except healthcare are positive in 2025. The latter lost a further 1.1% in June and is down by 6.6% this year. Communications services, which includes Telstra, is the best performing sector in 2025 with a return of 15.8%.
The largest sector by market weight, financials, which makes up 35.2% of the overall S&P/ASX 200 index, added 4.3% in June, largely due to the ongoing out-performance of the Commonwealth Bank and recovery in share price for Macquarie. Year to date, financials is up by 12.8%, outperforming the overall index which is up by 6.4%.
The conflict in Iran boosted oil prices and the energy sector added 9.0%, pushing it into the green for 2025. The other major resources sector, materials, slipped 3.1% as iron ore prices eased. The second biggest sector on the ASX with a weighting of 17.7%, it is flat for the year.
Portfolio Performance in 2025
The income portfolio to 30 June has returned 6.62% and the growth oriented portfolio has returned
2.40% (see tables at the end). Compared to the benchmark S&P/ASX 200 Accumulation Index (which adds back income from dividends), the income portfolio has outperformed by 0.16% and the growth portfolio has underperformed by 4.04%.
Income Portfolio
The objective of the income portfolio is to deliver tax advantaged income whilst broadly tracking the S&P/ASX 200.
The income portfolio was forecast to deliver an income return of 4.3% (based on its opening value at the start of the year), franked at 71.2%. After six months, it has returned 2.08%, franked at 68.9%. The income return is marginally lower than expected due to big cuts in resource and energy company dividends.
The portfolio has a defensive orientation and a bias to yield style stocks. On a sector basis, the biases are fairly minor. It is overweight consumer services and utilities (in order to find income), and marginally underweight financials (particularly the major banks), given our view that Australian banks are expensive. It is underweight information technology (where there are very few medium yielding stocks). It is marginally overweight materials and energy.
In a bull market, we expect that the income portfolio will underperform relative to the broader market due to the underweight position in growth oriented sectors and the stock selections being more defensive, and conversely in a bear market, it should moderately outperform.
In the month of June, the portfolio returned 1.17% compared to the index’s 1.41%. The strong performances of Telstra, Medibank, Macquarie Group and Charter Hall in particular didn’t make up for underweight positions in information technology and the Commonwealth Bank, and underwhelming performances of material stocks. Year to date, the income portfolio has outperformed the benchmark index by 0.16%.
No changes to the portfolio are proposed at this point in time.
The income biased portfolio per $100,000 invested (using prices as at the close of business 30 June 2025) is as follows:
Growth Portfolio
The objective of the growth portfolio is to outperform the S&P/ASX 200 market over the medium term, whilst closely tracking the index.
The growth portfolio in 2025 is moderately overweight communication services, health care, materials and information technology. It is underweight financials (particularly the major banks), consumer discretionary, industrials, real estate and utilities.
A major inclusion is the Betashares Portfolio Diversifier (EX20), weighted at 10% ($10,000). This ETF invests on an index-weight basis in stocks outside the top 20, providing ready and diversified exposure to mid and small cap stocks.
In the month of June, the growth portfolio returned 0.92% compared to the index’s 1.41%. Strong performances in CAR and Macquarie were offset by losses on resource stocks. Treasury Wine Estates continued to head south, while Xero pulled back due to a major capital raising. Year to date, the portfolio has returned 2.40%, underperforming the benchmark index by -4.04%. An underweight position in Commonwealth Bank (relative to the index), plus overweight positions in healthcare, energy and resources, are the main drags.
No changes are proposed to the portfolio at this point in time.
Our growth oriented portfolio per $100,000 invested (using prices as at the close of business on 30 June 2025) is as follows:
