Monthly Outlook: Drones, Lithium, Circle

US equity markets scaled new all-time highs in June, buoyed by a temporary truce between Israel and Iran, and a de-escalation of tensions related to trade tariffs.

In Australia, drone manufacturer DroneShield [DRO] extended its rally supported by increased defence spending. Lithium mining companies remained under pressure as investors looked for pockets of undervaluation to pick up beaten-down shares on the cheap. Elsewhere, stablecoin fever took over the U.S. following Circle Internet’s [CRCL] “blockbuster” debut, which could encourage more crypto companies to follow suit. Here are the three stories to follow in July.

From Down Under: Drones and Modern Warfare

The S&P/ASX 200 [AXJO] index closed the month of June 1.28% higher at 8,542.30 points. The Australian benchmark index hit an all-time high of 8,617.80 points during the month. Energy stocks emerged as the biggest winners following a surge in oil prices, which pushed the sectoral index S&P/ASX 200 Energy [AXEJ] higher by 9%.

Geopolitical tensions continued to influence investor sentiment, with Australian defence stocks seeing increased market interest.

Australia’s only publicly listed drone manufacturer, DroneShield, saw its shares rise by 73.38% in June after conflicts in Eastern Europe (Russia–Ukraine), the Middle East (Iran–Israel) and South Asia (India–Pakistan) spotlighted the growing importance of drones in modern warfare.

It was estimated by defence sector research firm Royal United Services Institute that Ukrainian drones accounted for 60–70% of damage done to Russian assets in the three-year-long war. Similarly, in the Indo-Pakistan war, drones were used as the primary weapon of choice. Elsewhere, a Bloomberg report said that Taiwan was in a rush to bolster its defences against China by stockpiling military-grade drones.

On June 27, DroneShield hit an over one-year high of A$2.60 after the company secured a A$61.6m contract from a European reseller and a A$9.7m deal with a Latin American country. The combined deal value of the two contracts was higher than DroneShield’s revenue earned in all of 2024 (A$57.5m).

Having seen the DRO stock surge by over 200% year-to-date,  a key challenge for investors is to determine whether DroneShield’s bull run still has legs.

Similarly, monthly gains for shipbuilding defence prime contractor Austal [ASB] and counter-drone system provider Electro Optic Systems [EOS] pushed their half-yearly returns to over 100% each.

VanEck Global Defence ETF [DFND] and BetaShares Global Defence ETF [ARMR], two ETFs) that provide exposure to defence sector stocks, saw higher trade volumes in June.

Lithium Miners: Undervalued or Falling Knife?

Australian-based lithium mining heavyweight Pilbara Minerals [PLS] has lost more than half of its market valuation over the past year. In 2025 alone, PLS shares are down by nearly 40%, as of the end of June. This sharp decline raises the question: is the market undervaluing Pilbara, or is the selloff a reflection of deeper concerns?

To understand this downturn, we need to look at lithium’s price trajectory over the past three years. The lightweight metal hit an all-time price of about RMB600,000 per metric tonne in China, less than three years ago, supported by the electric vehicle growth story. Since then, spot prices for battery-grade lithium have plunged roughly 89% to RMB61,300 per metric tonne, according to data provided by Trading Economics.

The primary driver? Oversupply from China.

US government officials have accused Chinese lithium producers of flooding global markets and engaging in “predatory pricing” to undercut competition. The supply glut and cratering prices have forced miners worldwide to lower production and suspend expansion plans.

Pilbara Minerals is not alone in seeing its share slump. New York-listed Albemarle [ALB], the world’s largest lithium producer, lost about 35% over the past year. Australia’s lithium pure play, Liontown Resources [LTR], has fallen by 23.2% and diversified miner Mineral Resources [MIN] has slumped 59.66% in the same period.

Despite the weakness, some analysts see value. Morningstar Research recently reported that Pilbara Minerals was trading at a 55% discount to its fair value price estimates of A$3.00 at the end of June. The estimates assumed lithium prices would stay near current levels.

Lithium price forecasts from analysts suggest that the market could “tighten” in 2025 due to the impact of production cuts in 2024 and improving demand for the metal. However, commodities research firm Fastmarkets warned that recovery may not be “strong” due to the inventory pileup in the supply chain.

Key trends that investors must keep an eye on are: the entry of “Big Oil” into lithium mining as they look to leverage their technical know-how, and cash-flush companies such as Rio Tinto [RIO] buying lithium assets during the downturn.

ETFs that track lithium mining companies include the Global X Lithium & Battery Tech ETF [LIT] and the iShares Lithium Miners and Producers ETF [ILIT].

Stablecoin Fever: Circle IPO

“While 2024 was defined by Bitcoin ETF inflows, 2025 is shaping up to be the year of crypto equities,” 10x Research wrote in an emailed note.

This outlook comes in the wake of a “blockbuster” IPO from stablecoin issuer Circle Internet [CRCL], which saw its shares soar 484% higher in June. The listing marked the first time a pure-play stablecoin company had gone public in the U.S.

Stablecoins are cryptocurrencies designed to hold a steady value by staying pegged to fiat currencies such as the U.S dollar and the Euro. Described as one of the few crypto products to have found product-market fit, stablecoins offer users borderless, instantaneous and low-cost payments.

More employers are turning to stablecoins to make cross-border payments. Individuals are using them to gain instant US dollar exposure from anywhere in the world. Meanwhile, crypto investors continue to rely on them to protect their portfolios against market volatility.

Now, the US government under President Donald Trump wants to put a stamp of legitimacy on the US stablecoin industry by introducing the “Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act” in 2025.

The stablecoin market is dominated by decentralized finance-focused stablecoins such as Tether’s USDT and Circle’s USDC.

USDT accounted for 62.54% of the world’s total stablecoin circulation worth $253.85bn, as of the end of June, data on DeFiLlama showed.

Circle’s USDC was the world’s second-most widely used stablecoin. It was created by Circle and Coinbase [COIN] in 2018 as a compliant and trustworthy alternative to USDT. Circle also issues a Euro-pegged stablecoin called EURC.

Investor enthusiasm has spilled over to the broader cryptocurrency sector, as Australia-listed BetaShares Crypto Innovators ETF [CRYP], a fund that tracks the performance of the 50 crypto leaders such as Riot Blockchain [RIOT] and Strategy [MSTR], rose 11.13% in June.

Among the standout performers was Coinbase, a crypto exchange that owns a stake in Circle, which jumped to a four-year high of $382 in June. Coinbase and Circle share interest income earned from USDC’s reserves, which are composed of short-term US treasuries, overnight repurchase agreements and cash held on a one-to-one basis.

Meanwhile, brokerage Robinhood [HOOD] shares saw their best month of the year, gaining 41.54% in June. Robinhood announced that the company will allow customers in the EU to buy cryptocurrencies that provide exposure to US stocks and equity ETFs.

The market is now expecting crypto exchanges Kraken and Gemini to hit the stock market in 2025. Other names thrown into the mix include blockchain tech company Ripple and stablecoin issuer Tether, though neither has confirmed any plans.

The broader US equity market enjoyed its second consecutive month of gains. Benchmark index S&P 500 [SPX] climbed to a record high of 6,215.08 points in the last trading session of June.

World stocks mirrored Wall Street gains as the iShares MSCI World ETF [URTH] closed in the green for the month.

Looking ahead, investor sentiment remains tempered by risks related to the July 9 deadline set by US President Trump to reach trade agreements with partner nations.

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