Relief Rally in 2025: What Australian Investors Need to Know

When markets bounce back fast, savvy investors take notice. 2025 has already been a year of pronounced “relief rallies” on the ASX – but what exactly is a relief rally, and how should everyday Australians react?

Understanding the Relief Rally: Not Just Another Bounce

A “relief rally” is a sharp, short-term surge in share prices following a period of heavy selling or negative sentiment. Unlike a sustained bull market, relief rallies are often triggered by news that’s less bad than feared – think inflation peaking lower than predicted, or the Reserve Bank of Australia (RBA) holding off on another rate hike.

In 2025, relief rallies have emerged after:

• RBA signals that rate hikes may be pausing after inflation data stabilised at 3.2% in Q1
• Global recession fears ease as US and China GDP growth beat forecasts
• Australia’s unemployment rate remains steady at 4%, defying predictions of a rise

These rebounds can be powerful: the ASX 200 gained 4.1% in just two days after the March RBA meeting, its sharpest short-term gain since 2022.

Why Relief Rallies Matter for Your Portfolio

Missing a relief rally can have a bigger impact than you might think. According to Vanguard, missing just the five best days in a given year can drastically reduce long-term investment returns. Relief rallies often account for some of these “best days”.

But relief rallies are double-edged swords:

• Pros: Opportunity to recoup losses or lock in gains if you bought during the dip.
• Cons: Rallies can be short-lived, especially if underlying economic risks haven’t disappeared.

In 2025, we’ve seen investors pile into tech and financials during relief rallies, only to see volatility return weeks later. For example, the Commonwealth Bank of Australia (CBA) surged 6% in a post-RBA rally, but gave back half those gains by month-end as global bond yields spiked.

How to Navigate a Relief Rally in 2025

Whether you’re a seasoned investor or just starting out, relief rallies require a cool head and a clear plan. Here’s what to keep in mind:

• Stick to Your Strategy: Don’t chase quick wins. If your investment plan is built for the long-term, use rallies to rebalance rather than overhaul your portfolio.
• Watch the Macro Trends: Relief rallies are often sparked by policy announcements or macroeconomic surprises. Keep an eye on RBA statements, inflation data, and global growth forecasts.
• Be Wary of FOMO: Fear of missing out can drive poor decisions. Remember: relief rallies can reverse quickly if the economic outlook worsens.
• Consider Diversification: In 2025, sectors like resources and healthcare have provided more stable returns during turbulent periods. Don’t bet everything on one hot sector.
• Review Your Risk Tolerance: Sharp market movements are a good reminder to check if your portfolio matches your comfort with volatility.

Example: After the April 2025 inflation data came in lower than expected, many ASX-listed property trusts surged 7–10% in a week. Investors who held through the volatility benefited, but those who bought in late saw some of those gains erased as interest rate expectations shifted again.

What’s Next for Relief Rallies in Australia?

As we move further into 2025, relief rallies are likely to remain part of the investing landscape. With the RBA taking a data-driven approach and global growth still uneven, markets could stay choppy. For Australians, that means:

• Staying informed about key economic data and policy shifts
• Having a plan for sudden market surges and pullbacks
• Remembering that investing is a marathon, not a sprint