ASX Market Update 2nd December 2025

Global Market Commentary

Chart: S&P 500 as of 01/12/25

A slightly early update this week, mostly due to scheduling, so it may end up being a shorter read. However, we can all breathe a sigh of relief as a nasty 20% correction looks to have been avoided, for now. There were some real concerns after the NVDA results as markets turned on a dime and were unable to hold onto their gains. For the NASDAQ that meant a 5% swing which without reason got my attention. This turned out to be the final flush of the latest sell-off as the S&P500 & NASDAQ have bounced +4.40% and +6% since and we seem to be moving into a set up for a typical Santa rally. Calmer waters have also prevailed as the VIX has fallen from 28 to around 17 meaning volatility has fallen away dramatically. However, I am still wary as Bitcoin, which has been acting as a lead for equity movements over the past two years, has turned down again and is seeing significant selling.

The US markets are still trading blindly and without any real conviction as US tier 1 data is still yet to flow through properly. Nov jobs data is not scheduled for release until after the Fed meets now but we do have some ISM PMI data this week. Manufacturing PMIs out last night were weaker with services PMI due out Thursday morning our time. Other data points such as initial jobless claims and ADP jobs figure continue to point to a solid economy with the Atlanta GDP Now figure forecasting a 4%+ Q3 GDP print. Despite all this the Fed is priced at a 90% chance to cut rates 25bps at their meeting next week, but again it will come down to commentary that comes from Powell, that will determine the markets’ reaction.

Japanese Jitters?

Chart: Japan Government Bonds 10YR as at 02/12/25

Its not often we need to cover the 10yr Japanese Government bond yields and their impacts on equity markets but here we are. As we saw last August, when the S&P500 lost 8% in three sessions, Japanese yields, rate expectations and currency movements can have a material impact on stocks. This is because what has happened over the last few years is that investors have borrowed at near zero rates in Yen and then invested in local stocks but also pursued massive investments into US equity markets and big tech. The fear is that may unwind and cause disturbances in the force. If yields in Japan continue to climb as rates are expected to go higher and the Yen strengthens vs the USD then this would act as a headwind for returns on the above trade and hence the unwind. The BoJ’s speech yesterday all but confirmed a hike at their next meeting on the 19^th December and was more hawkish than expected as well thus putting further hikes in 2026 on the table. This has seen the 10yr Japanese bond yields to spike to levels not seen in decades at 1.88% as we speak. These were at 0.55% a year ago and negative in 2019. We also have the new Japanese Prime Ministers fiscal spending plans for 2026 also come in more than expected which means a higher term premium will be demanded by markets.

The needle the BoJ has to thread is to be able to lift rates without spooking the markets and letting the trade unwind gradually rather than everyone rushing for the exit. I raise these issues as it is a material risk for markets to end the year and going into 2026. However, I still believe any correction of this nature should be aggressively bought as overall I still believe we are in a multi-year secular bull market. Valuations may still be stretched but are also supported by strong earnings growth and expanding profit margins. Add in lower rates and taxes in the US in 2026 along with deregulation I feel there could be many more legs left in upside momentum.

S&P/ASX 200

Chart: S&P/ASX 200 on 02/12/25

The XJO also rebounded last week as it gained around 3%, but we still sit 5% off all time highs. I believe the market wants proof the macro picture for Australia is sound and still gaining momentum. Capex figures last week should feed into a solid Q3 GDP print but company profits and inventories will be a drag. I do believe how the consumer performs during Black Friday; Cyber Monday and Christmas sales will determine how we perform into the end of the year. Resources may also provide a tailwind with the likes of copper, aluminum, iron ore, gold, silver etc. prices continuing to drive higher supporting higher valuations in that sector. Our tech sector is also still down almost 20% which for provides an opportunity leading into the end of the year. I believe any move higher in the Nasdaq will also see a response here as there are some quality names still well down on where they were just a few months ago.

Hyped up Hyperscalers!

Chart: Alphabet (GOOG) as at 01/12/25

The recent headwinds the AI sector ran into has provided some opportunities for entry or accumulation if you have a position already. None of these suggestions are revolutionary but I feel provide a low-risk AI exposure with profits growing at exponential rates, recently backed up with an exceptional Q3 earnings season. These are obviously all listed in the US but can still be bought through me and settled in AUD if you have a CMC account.

Alphabet (GOOG) $315.12- I believe over the last 6 months GOOG has turned itself into one of the most vital companies in the AI space and should be held on a higher echelon such as Nvidia. Its recent TPU deal with META now means GOOG operates on all three levels of the AI space. It obviously has the application with Gemini and dozens of products it currently has that AI will seamlessly integrate into. It also has the network level with its Google Cloud offering. Finally, it now has the hardware level with the sale of its proprietary TPU tech to META. Whilst TPUs will never compete with NVDA and their GPU’s as they are highly specialised to complete set tasks they still will be highly sought after especially since now GOOG has announced they are for sale. GOOG has used TPU’s for almost a decade internally themselves as they are highly efficient and save a lot on costs by reduced energy usage when compared to GPUs. Back in July when I first recommended GOOG, I said this would be an advantage for them internally and their bottom line. I didn’t imagine they would on sell that IP.

As for valuation GOOG has now closed that trailing gap it had with the other hyperscalers moving from 18x forward earnings in July to 30x at present. When I first recommended GOOG in July at around $180 per share this was one of the main thesis for entry that GOOG would eventually catch up. Well after a +75% return since then it has played out as expected. Concerns surrounding its search business have melted away after paid clicks accelerated to 7% growth in Q3 up from +4% in Q2. Also, there is no threat GOOG will be forced to split as the court case surrounding this has concluded. However, it’s now widely recognised GOOG is transforming into much more than a search-based company with so many levers to pull. If you have a long-term investment horizon of, say 5+ years then I am comfortable with an entry in GOOG here despite it trading close to all time highs. If not, I’d be looking for a pullback to that $290 region for a margin of safety. GOOG is an extremely high-quality company that should continue to grow earnings in the mid-teens for years to come. Management, which was being doubted, should be fully backed from here.

Microsoft Corp (MSFT) $486.74- Another very well-known name I won’t have to explain too much but MSFT looks great value here after falling 12% from recent highs. Like GOOG, MSFT has many levers to pull in the AI space with the best being its Azure cloud offering. This segment is growing at 30-40%pa and driving overall top line growth at MSFT backed up by its much more mature software side of the business. Whilst not AI centric at the moment I also wouldn’t dismiss MSFT gaming division. With their Activision acquisition they are now the largest listed gaming developer and publisher. We are also seeing the likes of EA & Ubisoft being taken over and taken private leaving less options for investors to gain exposure to gaming. MSFT trades at 29x forward pe which is down from the 32x it was trading at around $550ps. Again, another long-term hold here I am happy to enter at current prices.

Amazon Inc (AMZN) $233.88- AMZN doesn’t have as many strings to its bow as MSFT & GOOG when it comes to AI but its AWS cloud offering is still the largest in the world and growing at high teen rates. But AMZN will benefit more from AI than most through automation and robotics. AMZN is the US second largest employer but its moving more of its warehouses to be fully automated with robots picking items off the shelf and soon robots will also delivering these items as well. Obviously, this is a huge cost saving as AMZN predicts themselves that robotics and automation will save them from having to hire another 600k+ people. Previous to their journey along the autonomy road 50-60% of a warehouses cost was workers walking back and forth picking items for customers. AMZN has recently fallen around 10% and trades around 29x FY26 earnings but that falls to 26x FY27 earnings. Again, another high-quality long-term company here.

The markets seem to want to close the year higher despite not having the conviction that it had around a month ago. Again, the AI thesis was tested and it seems like the market is satisfied with the answers thus far. I would expect more outperformance by the tech sector in 2026 as the AI tentacles spread further with more use cases and benefits.

As you all know this is my favourite time of the year made all the more special with the magic and wonder the kids carry, the longer we can keep that magic and belief alive the better in my opinion. There should be at least one more market update before the end of the year if not two. I hope you all have a wonderful & safe week ahead. I look forward to speaking with you all soon. Go Crows!

heath@hlminvestments.com.au

0413 799 315

Important Notice

Heath Moss is an Authorised Representative (AR 278605) of PGW Financial Services Pty Ltd AFSL 384713. Any advice in this article should be considered General Advice only and does not consider your personal needs and objectives or your financial circumstances. You should therefore consider these matters yourself before deciding whether the advice is appropriate to you and whether you should act upon it. I am happy to assist you in this process. To do so, I will need to collect personal and financial details from you before providing my recommendations. Please note the author may own shares in the companies mentioned in the above blog.