National

Wall Street Funds Exit – But Where’s the Money Going Now?

Inspirepreneur Team

Apr 28, 2025 3:57 PM IST

Category National

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Synopsis

Money is pouring out of Wall Street at a striking pace, as global market volatility shakes investor confidence. But where is all that cash landing? Lately, the answer is clear and unexpected: the Australian…

Money is pouring out of Wall Street at a striking pace, as global market volatility shakes investor confidence. But where is all that cash landing? Lately, the answer is clear and unexpected: the Australian Stock Market. The ASX, long regarded as a safe haven in times of global uncertainty, is now seeing a sharp uptick in global capital inflows. While Wall Street continues its rollercoaster ride, local investors and fund managers in Australia are pointing to the strength and stability of the Australian sharemarket as a key reason behind this dramatic shift.

Wall Street Turmoil Sparks a Search for Safer Options

The global investing landscape has transformed since the US President launched a wave of tariffs on “Liberation Day,” intended to shake up international trade. Wall Street hasn’t taken the news kindly. The Dow Jones, S&P 500, and Nasdaq suffered notable drops between April 2 and April 24:

• Dow Jones: Fell 5.05% (from 42,225.32 to 40,093.40)
• S&P 500: Down 3.3% (from 5,670.97 to 5,484.77)
• Nasdaq: Slipped 2.47% (from 17,601.05 to 17,166.04)

Meanwhile, the Australian Stock Market has weathered the turbulence surprisingly well. The S&P/ASX 200 lifted 0.43% in the same period, from 7,934.50 to 7,968.20.

Why Is the Australian Sharemarket Outperforming?

Relatively Insulated from Trade War Fallout

Australian fund managers and market strategists note that Australia has benefitted from being relatively insulated against global tariff shocks—even after facing its own 10% baseline tariff. The Australian sharemarket has proven resilient, and the local economy, according to many, is holding up much stronger than anticipated.

Between April 2 and April 24, Australian shares not only avoided the sharp losses seen in the US but posted modest gains. While this may seem minimal, a closer look reveals that several Australian blue-chip stocks performed impressively:

• Commonwealth Bank of Australia (CBA): Rose 6.4% ($154.82 to $164.72)
• Northern Star Resources: Up 15.3% ($18.07 to $20.84)
• Telstra: Climbed 2.8% ($4.32 to $4.44)

This contrasts sharply with the declines recorded by the main Wall Street indexes.

Defensive Stocks and Gold Lead the Way

The Surge of Gold Amid Instability

When the global economic outlook grows uncertain, investors have traditionally relied on “defensive” plays. Gold is thriving in this climate. It has jumped almost 18% since the start of the trade war and over 40% across the past year. Australian gold miners like Northern Star Resources, Evolution Mining, and Newmont Corporation are direct beneficiaries, seeing share price gains of 15%, 12%, and 11% respectively in a matter of weeks.

Nick Frappell, global head of institutional markets at ABC Refinery, highlights ongoing demand for gold from government buyers and strong Chinese interest. That appetite isn’t likely to slow down as market uncertainty remains high.

Strong Showing from Banks and Stable Businesses

Market experts like Omkar Joshi (Opal Capital Management) point to major Australian banks, particularly CBA, as key safe-haven assets. Despite earlier worries about them being overpriced, steady earnings and liquidity make banks attractive when global conditions are shaky. Fund managers stress that Australian financials are largely insulated from international tariff wars, and therefore continue to attract inflows.

Telstra, the nation’s biggest telecom, has also outperformed as a classic “defensive stock”—seen as stable regardless of external economic shocks.

Global Investors Seek Alternatives

The Flow of Funds Into the Australian Stock Market

A marked shift is underway. Jun Bei Liu, co-founder and portfolio manager at Ten Cap, sums it up plainly:

“The [investor] money is all coming out of the United States... we are seeing most of them coming out of the US going into equities into Australia and Asia.”

The United States has typically commanded the biggest chunk of global investment portfolios. Now, its unpredictability during the recent tariff wars is fuelling a retreat. Notably, IMFs recent downgrade of the US economic outlook (down to 1.8% growth from an earlier 2.7% forecast) reinforces this trend, slashing potential US GDP growth by around $650 billion. By contrast, despite a slight IMF downgrade, Australia remains on track to be one of the fastest-growing developed economies globally through 2025.

Moomoo market strategist Jessica Amir describes the ASX as “a defensive player in the trade war”. She adds:

“The US market is very unpredictable, whereas our market has been pulling us higher.”

Big Winners on the Australian Sharemarket

While volatility is present everywhere, Australian blue chips and gold miners are attracting foreign capital. Three sectors stand out:

• Financials (especially banks): Record profits are expected, with little direct impact from international trade issues.
• Gold miners: Directly benefit from investors seeking security, with prices continuing to climb.
• Industrials: Seen as more resilient, winning regardless of trade war outcomes or even local election results.

How the Australian Stock Market Stays Resilient

Factors Supporting Australian Shares

Several elements provide a buffer for the Australian sharemarket:

• Commodity Exports: Australia’s role as a key exporter of minerals (iron ore, coal, gold) means trade tensions sometimes even benefit local miners.
• Strong Banking System: Local banks are well-capitalised and enjoy stable regulatory environments.
• Sound Regulation: Australia’s regulated market structure adds a layer of security appealing to both local and global investors.
• Political Stability (Relative): While no market is immune to politics, Australia’s government is seen as less erratic than that of the US at this time.

The ASX’s Recent Wild Ride

The S&P/ASX 200 did show volatility in April, experiencing its sharpest single-day drop in five years but then rebounding with its strongest one-day rise in two years. Despite these swings, the index emerged in positive territory by late April, unlike its Wall Street counterparts.

Even as President Trump announced the possibility of easing tariffs on China and tempered his tone regarding US Federal Reserve policy, hope for a global recovery remains tentative. But for many global investors, the risk–reward calculation continues to favour the Australian sharemarket.

Source

The Sydney Morning Herald

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