Key Points

In this note, we take the opportunity to focus on some longer-term thematics we believe to be important for investors, business owners and consumers. Headlines can be all absorbing, but they often take attention away from significant bigger picture changes.

Specifically, we focus on the notion of regime change. This is not a novel concept but broadly refers to the idea that regimes occur in 30-40 year political and economic cycles. We believe we are currently in the early years of a new regime. This regime will look and feel very different to the prior regime that began in the late 1970s / early 1980s and lasted until circa 2015.

The new regime will bring with it some significant long-term changes for the global economy and consequently, for financial markets too. Lower long-term US GDP growth, a more volatile macro-economic environment and structurally higher inflation are all likely to be characteristics of the new regime.

For financial markets, we think this translates into some key longer-term themes, including a structurally higher and steeper yield curve (think pre-GFC trading ranges), a structurally weaker US dollar and a relatively lower return profile for US vs. non-US equity markets.

For investors, the new regime will demand a different approach to portfolio construction. Some key correlations appear to be shifting, implying that unhedged exposures to US equities are no long a key source of diversification in portfolios. Our colleagues at NAB Private Wealth & JBWere note that relative to the prior regime, a new “regime friendly” portfolio might include more inflation protection, more exposure to commodities and energy (and AUD), less exposure to USD assets, more emerging market exposure; and fewer growth assets.

For further details please see Economic and Financial Market Update (23 June 2025)