While market moves have not been huge recently, when you look at the difference in performance between stocks and the reactions to individual earnings results the Australian Q2 2025 reporting season is shaping up as one of the most volatile on record.  More than 25 stocks have moved north of 10% on their results, while over 50 have shifted more than 5%, marking an exceptional period of market turbulence.

What's particularly striking is that this volatility isn't confined to small caps. Blue-chip companies are experiencing price movements typically associated with much smaller stocks. Notable movers include Coles surging aggressively, while Woolworths, Commonwealth Bank, and CSL have all faced sharp declines following their results.

The outsized reactions appear disconnected from underlying earnings changes, suggesting heightened market sensitivity potentially driven by the rise of passive and momentum trading strategies that react aggressively to even modest earnings surprises or disappointments.

Market rotation attempts are evident, with investors looking to shift from last year's winners like banks into sectors such as healthcare, though it's too early to call this a definitive trend change.

The causes remain multifaceted, with companies still adjusting to tariff impacts and demand uncertainties, making it difficult to identify one overarching theme. For investors and advisors, this environment demands a measured approach – looking beyond short-term volatility to focus on long-term business fundamentals.

With the reporting season nearing completion, relative performance across portfolios is likely to show significant variation.

The key takeaway: maintain perspective and avoid emotional reactions to what may prove to be temporary dislocations between price and value.