Summary

Global markets continued to rally during May. Equities were driven higher by strong

US company earnings and hopes for a resolution to the US-Iran conflict. Crude oil prices remained elevated, above $100 for much of the month, as US-Iran negotiations were drawn out. This also resulted in fears of higher, more persistent inflation, which weighed on government bond yields.

The impacts of higher oil prices were evident in recent economic data. The US Consumer Price Index (CPI) rose from 3.3% in March to 3.8% in April, with similar trends observed in the Eurozone and Australia. The Reserve Bank of Australia (RBA) lifted the domestic cash rate to 4.35%, citing inflation concerns. Expectations for further RBA rate hikes have stabilised, with one additional rate hike priced in for the rest of the year.

The Federal Reserve (Fed), European Central Bank (ECB), Bank of England (BoE), and Bank of Japan (BoJ) all held rates steady in their late April meetings. However, market participants have now priced in rate hikes for each of these major central banks through 2026.

The Australian equity market underperformed global equities. This was due to a lack of

ASX-listed artificial intelligence (AI) beneficiaries and negative sentiment following the Federal Budget earlier in the month. The Big 4 banks sold off following the Budget as it negatively weighed on the housing outlook and bank credit growth.

The Australian 10-year bond yield remained rangebound between 4.9% and 5.1% through May. The Australian dollar similarly traded sideways between $0.710 and $0.725.

Selected market returns (%)

MAY 2026

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

KEY MARKET AND ECONOMIC DEVELOPMENTS IN MAY 2026

Financial markets

Risk assets continued to rally through May, driven by a positive US earnings season and a continued compression of credit spreads. The rally was led by the US technology sector and emerging markets. The Magnificent 7 reported strong earnings results and upgraded

AI capital expenditure guidance, which also provided support for semiconductor companies.

 Australian equities

The S&P/ASX All Ordinaries Index experienced intra-month volatility, driven by negative sentiment following the RBA rate hike and uncertainty following the Federal Budget. The market expects changes to Capital Gains Tax (CGT) and negative gearing policy to weigh on the Australian property market, prompting a sell-off in the Big Four banks. This uncertainty is likely to persist until the policy is finalised and legislated. Australian equities recovered to close the month up 1.22%, supported by easing Middle East tensions.

The materials sector rose 10% during the month, driven by a strong price rally in base metals, whereas the healthcare sector continued to underperform, falling 10%, largely driven by CSL, which released another earnings downgrade resulting in a sharp selloff in the stock.

Small caps continued to outperform large caps. The S&P/ASX Small Ordinaries Index rose 2.03%,

largely driven by resources stocks.

Global equities

Global equity markets delivered strong returns in May. The MSCI World Index rose 4.61% (USD), led

by the US and Japan.

In the US, the S&P500 rose 5.26% (USD) on the back of an upbeat earnings season and strong investor flows into AI beneficiaries within the technology sector. The remaining sectors such as financials, industrials, healthcare and consumer staples saw more modest gains.

Japanese equities experienced an 11.9% (JPY) rally, led by the technology sector. The yen weakened

modestly during the month.

Emerging markets equities also saw a strong rally, gaining 9.7% in May. Large semiconductor companies (TSMC, Samsung and SK Hynix), which account for 24% of the index, drove a majority of the rally, benefitting from strong AI capital expenditure guidance from the Magnificent 7.

Commodities

Crude oil prices remained volatile throughout May, briefly rising above US$100 per barrel before finishing the month at US$88. Price movements were driven by ongoing uncertainty surrounding negotiations between the United States and Iran, as well as intermittent military activity in the region. While tensions have generally eased and a tentative agreement to extend the ceasefire was reached late in the month, the timing of a lasting resolution and the full reopening of the Strait of Hormuz remains uncertain.

Gold prices were also volatile during May. The precious metal continued to benefit from geopolitical uncertainty and a softer US dollar, although gains were tempered by elevated US Treasury yields and expectations that the Federal Reserve may maintain a restrictive policy stance for longer than previously anticipated.

Bond markets

Bond markets continued to face headwinds in May due to sticky inflation fears placing upward pressure on government bond yields. Above target inflation has seen markets shift to expecting rate hikes in both the US and Europe. The US 10-year Treasury yield peaked at 4.66% during the month, its highest level in over a year, while the US 30-year also traded up to 5.18%, the highest level since late 2023. Kevin Warsh was sworn in as the new Federal Reserve (Fed) Chair on 22 May 2026. Bond markets will be monitoring his stance on rate policy and Fed balance sheet reduction.

The Australian 10-year government bond yield fluctuated between 4.9% to 5.1% before ending the month at 4.89%, as market fears of persistent inflation subsided due to the continued de-escalation between the US and Iran.

Economic developments

Budget lands with tax sting

The Australian Federal Budget was a key focus in May, with proposed changes to CGT and negative gearing attracting particular attention. Whilst the changes remain subject to legislation, as currently proposed, from 1 July 2027 the existing 50% CGT discount for individuals, trusts and partnerships would be replaced with cost-base indexation and a minimum 30% tax rate on capital gains. Negative gearing for residential property would also be limited to new builds, with the policy framed as a measure to improve housing affordability.

For investors, the potential implications are significant. If implemented in their current form, thechanges may reduce the after-tax attractiveness of long-held growth assets and established residential property investments. This could encourage some investors to reassess portfolio positioning, with greater emphasis on income, liquidity and tax efficiency.

In the near term, the proposed changes have added to uncertainty in the housing market. Forward-looking indicators have softened, with Sydney auction clearance rates falling below 50% and Westpac’s “time to buy a dwelling” index declining to an 18-month low.

The data starts to crack

Australia’s data deteriorated through May, challenging the economy’s ability to absorb further tightening. The RBA raised the cash rate by 25 basis points to 4.35%. This was followed by a soft domestic jobs report which saw the unemployment rate increase to 4.5% in April, its highest level since late 2021. Business confidence remained deeply negative as rising prices weigh on margins, forward orders and demand. Consumer confidence improved slightly in May but remained at recessionary levels, with households under pressure from petrol prices, mortgage costs and weak real income growth.

Economists pushed back their RBA rate hike expectations following the run of soft data. Market pricing has now shifted to a higher-for-longer profile, with the RBA’s May forecasts assuming the cash rate rises to around 4.70% by the end of 2026.

A similar narrative played out offshore with higher inflation forcing a more hawkish outlook. US inflation reaccelerated, with PCE inflation rising to 3.8% year-on-year in April and core PCE lifting to 3.3%, both still well above the Fed’s 2% target. Markets have now pushed out expectations for Fed easing and began pricing rate hikes in 2026.

Outlook

The global economic outlook has improved over recent months as geopolitical tensions have eased. Signs of de-escalation in the conflict between the United States and Iran have reduced the immediate risk of a prolonged disruption to global energy supplies. A sustained reduction in tensions would be supportive of financial markets, particularly if lower energy prices help moderate inflationary pressures and provide central banks with greater flexibility to ease monetary policy.

Market sentiment continues to be underpinned by resilient corporate earnings and ongoing investment in artificial intelligence and digital infrastructure, particularly across the technology and semiconductor sectors. While inflation and central bank policy remain important considerations, investors have increasingly shifted their focus back toward company fundamentals, productivity improvements and long-term growth opportunities.

In Australia, the outlook remains more nuanced. Proposed changes announced in the Federal Budget have introduced uncertainty for investors, households and parts of the financial sector, particularly in relation to housing and taxation policy. Offsetting this, higher commodity prices continue to support the resources sector and provide an important tailwind for the domestic economy. In this environment, maintaining a diversified portfolio and focusing on high-quality businesses with resilient earnings and strong balance sheets remains key to navigating an evolving market landscape.

Major market indicators

	31-May-26	30-Apr-26	31-Mar-26	Qtr change	1 year change
Interest Rates (at close of period)
Aus 90-day Bank Bills	4.43%	4.34%	4.19%	+47.0	+65.0
Aus 10yr Bond	4.89%	4.97%	4.93%	+13.2	+54.0
US 90-day T-Bill	3.60%	3.59%	3.61%	+1.0	-65.0
US 10 yr Bond	4.44%	4.39%	4.32%	+47.3	+5.0
Currency (against the AUD)
US Dollar	0.720	0.719	0.685	0.96%	11.80%
British Pound	0.533	0.529	0.519	0.97%	11.64%
Euro	0.615	0.610	0.597	2.01%	8.54%
Japanese Yen	114.47	112.81	109.55	2.98%	23.48%
Trade-Weighted Index	66.60	66.30	64.30	1.68%	11.74%
Equity Markets
Australian All Ordinaries	1.2%	2.4%	-7.3%	-4.0%	6.8%
MSCI Australia Value (AUD)	1.4%	1.3%	-4.7%	-2.1%	17.7%
MSCI Australia Growth (AUD)	-1.7%	2.4%	-6.6%	-5.9%	-13.8%
S&P 500 (USD)	5.3%	10.5%	-5.0%	10.5%	29.8%
MSCI US Value (USD)	2.4%	7.4%	-5.2%	4.3%	23.8%
MSCI US Growth (USD)	8.2%	13.9%	-4.5%	17.7%	33.9%
MSCI World (USD)	4.6%	9.6%	-6.3%	7.4%	28.0%
Nikkei (YEN)	11.9%	16.1%	-12.6%	13.5%	77.8%
CSI 300 (CNY)	1.9%	8.1%	-5.5%	4.1%	30.9%
FTSE 100 (GBP)	0.7%	2.3%	-6.2%	-3.3%	22.5%
DAX (EUR)	3.3%	7.1%	-10.3%	-0.7%	4.6%
Euro 100 (EUR)	3.7%	4.4%	-5.9%	1.8%	20.5%
MSCI Emerging Markets (USD)	9.7%	14.7%	-13.0%	9.5%	55.1%
Commodities
Iron Ore (USD)	-1.7%	1.2%	8.8%	-0.5%	12.3%
Crude Oil WTI U$/BBL	-16.1%	5.6%	53.6%	-11.4%	48.3%
Gold Bullion $/t oz	-0.6%	-0.1%	-12.0%	-0.7%	39.7%

Sources: Quilla, Refinitiv Datastream

Summary

In April, global markets recovered much of the drawdown experienced in March. A fragile ceasefire between the US and Iran took hold, and while the Strait of Hormuz briefly reopened to traffic, restrictions were reimposed later in the month. As a result, crude oil prices were highly volatile—falling from around US$110 per barrel to US$100, before surging to approximately US$126 by month-end amid renewed concerns over escalating tensions.

These developments fed through to economic data and central bank decisions. US CPI rose at its fastest pace since 2022, prompting the Federal Reserve (Fed), Bank of England (BoE), and European Central Bank (ECB) to hold rates steady, citing energy-driven inflation pressures. Despite this, equity markets rallied strongly, with investors looking through short-term inflation noise and focusing on resilient corporate earnings, potential supply-side improvements, and cautious optimism around renewed Middle East peace talks. Gains were more subdued in oil-importing regions.

The Australian equity market underperformed global peers, weighed down by concerns over

fuel security as shipping disruptions in the Strait of Hormuz persisted late into the month.

Australian 10-year bond yields traded largely sideways throughout April. Meanwhile, the Australian dollar strengthened materially to just under US$0.72, supported by expectations of relatively more hawkish rate settings and firm commodity prices. Gold prices remained stable, albeit below their January peak.

Selected market returns (%)

APRIL 2026

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

KEY MARKET AND ECONOMIC DEVELOPMENTS IN APRIL 2026

Financial markets

April delivered a sharp V-shaped recovery in most major global equity markets after a geopolitically driven selloff in March. The rebound was led by US technology and emerging markets, while the ASX lagged its peers. The recovery was complicated by continued unease in the US-Iran standoff, which pushed oil prices higher, whilst questions over OpenAI’s revenue trajectory drove late-month volatility in the AI complex.

Australian equities

The S&P/ASX All Ordinaries Index rose 2.36% over the month, recovering only part of March’s 7.3% decline. Australian equities were weighed down by the strength of the Australian dollar, elevated oil prices, and increasingly hawkish expectations from the Reserve Bank of Australia (RBA).

The ASX 200 resources sector gained 3.13%, supported by ongoing strength in oil and base metals, with energy producers and iron ore miners leading the advance. In contrast, banks and consumer-facing sectors lagged, as higher interest rate expectations pressured rate-sensitive areas of the market.

Small caps outperformed large caps, staging

a notable rebound. The S&P/ASX Small Ordinaries Index rose 3.34%, with gains largely driven by defence and technology stocks.

Global equities

Global equity markets staged a strong recovery in April. The MSCI World Index rose 9.6% (USD), more than recouping the negative performance in March. However, the dispersion among regions was significant.

In the US, the S&P 500 rose 10.5% (USD), with the Nasdaq 100 leading the recovery as growth stocks experienced a rebound in valuations that had compressed in March on uncertainty. The recovery was driven primarily by a resilient first-quarter earnings season and a broad-based bounce from late-March lows. AI-related stocks contributed, but with growing dispersion: investors increasingly distinguished between

AI capital expenditure that has been visibly monetised, seen in Alphabet and Amazon Web Services, and capital expenditure without visible monetisation in Meta. The shift was first signalled by reports highlighting OpenAI’s revenue and weekly active user misses.

Japanese equities posted a sharp recovery with the Nikkei 225 up 16.1% (JPY) as the yen weakened modestly and energy-cost concerns abated relative to peak panic.

Emerging markets soared in April. The MSCI Emerging Markets Index rallied 14.7% (USD). Despite continued Middle East disruption, emerging market equities benefited from a softer USD trajectory, a renewed risk appetite and a strong rebound in AI hardware stocks that make up a large portion of emerging market indices.

Commodities

Crude oil remained the key focus. Brent crude continued to grind higher through April, ending the month 12.63% at US$114.15. The United Arab Emirates (UAE) announced on 28 April that it would exit OPEC+ effective 1 May. The decision reflects a long-standing UAE-Saudi disagreement over output policy and has implications beyond the war in the Middle East, with the UAE likely to pump oil unconstrained once shipping through the Strait of Hormuz normalises.

Gold consolidated throughout the month

following March’s retreat, remaining flat.

Bond markets

Bond markets continued to face a hostile backdrop. After a brief reprieve in early April as risk-off conditions eased and yields retraced, the US 10-year Treasury yield finished at 4.39%, driven by the Fed’s most divided rate decision since 1992: an 8-4 vote to hold. Three regional presidents dissented against the statement language signalling a bias toward cuts, and one governor dissented in favour of a 0.25% cut. Following the decision, money markets abandoned bets on a Fed rate cut through March 2027, with traders increasingly pricing the possibility of a hike in 2027. The Fed’s statement explicitly cited inflation as elevated, partly due to the recent increase in global energy prices.

In Australia, the 10-year government bond yield oscillated around 5% through the month, with markets continuing to price further RBA hikes after the March quarter inflation data release.

Economic developments

The Iran war and the tentative ceasefire

April opened with the US-Iran conflict at peak intensity. President Trump warned Iran of “complete demolition” and deployed further military assets to the region. Oil broke above US$100 per barrel on the back of the supply shock. A tentative de-escalation arrived early in the month. While markets responded with a sharp rally, the truce proved fragile, and

shipping through the Strait of Hormuz remained restricted. Knock-on effects continued to build through the supply chain: insurance costs

for Gulf shipping rose sharply, and listed corporates, including Worley, Qube, Boral and Transurban, all flagged earnings hits from the disruption. Global defence budgets were also being lifted, with Australia’s own boost of $53 billion over the next decade announced mid-month.

Growing inflation pressures

Preliminary data showed US Q1 2026 GDP grew at a 2.0% annualised rate, rebounding from 0.5% in Q4 2025 but still slightly

below expectations.

Growth was driven by investment, exports, consumer spending and government outlays amid the backdrop of the Middle East conflict. AI investment was estimated to be around half of all GDP growth. Additionally, jobless claims came in at 189,000, the lowest level since 1969, and Personal Consumption Expenditure (PCE) inflation, the Fed’s preferred measure for assessing price increases, was 3.5% over 12 months, well above its 2% target.

Australian inflation, measured by the Consumer Price Index (CPI), was better than expected

but still above the 2-3% target band. Headline CPI measured 4.6% while trimmed mean CPI, which removes the effects of volatile items in the inflation basket, came in at 3.3%. The Fed, ECB and BoE all held rates over April, with the direction of interest rates expected to diverge further between the RBA and global peers.

Australia entered April with an environment that is more exposed to the energy shock than other countries without policy flexibility. The data flow and official commentary over the month did very little to soften that view. Westpac’s consumer sentiment index plunged 12.5% on petrol prices and business confidence in the NAB Business Survey recorded its second-largest drop ever.

The unemployment rate, however, remained at 4.3% month-on-month, and the RBA delivered notably hawkish comments in the lead-up to the April CPI release.

Outlook

The global economic outlook became more uncertain in April, with the US-Iran conflict and broader economic conditions adding to inflationary pressures and influencing central bank decisions and bond yields. While these dynamics present near-term challenges, the underlying picture is more nuanced than headline risks suggest.

For risk assets, the near-term trajectory will be heavily influenced by the resolution or escalation of the Iran conflict, particularly for energy-importing markets. A prolonged conflict or escalation would weigh on the global economic growth outlook and corporate earnings growth. Despite the volatile backdrop, the AI investment theme remains a powerful tailwind, with capital expenditure, productivity gains and earnings momentum continuing to support both economic growth and equity markets globally.

We continue to monitor the situation in the Middle East closely, particularly the duration of oil supply disruptions through the Strait of Hormuz and the potential market impacts. Near-term conditions are likely to remain volatile, and portfolio adaptability and diversification remain important.

Major market indicators

	30-Apr-26	31-Mar-26	28-Feb-26	Qtr change	1 year change
Interest Rates (at close of period)
Aus 90-day Bank Bills	4.34%	4.19%	3.96%	+57.0	+32.0
Aus 10yr Bond	5.01%	4.93%	4.76%	+26.0	+74.3
US 90-day T-Bill	3.59%	3.61%	3.59%	+1.0	-61.0
US 10 yr Bond	4.39%	4.32%	3.96%	+13.5	+23.8
Currency (against the AUD)
US Dollar	0.719	0.685	0.713	2.63%	12.36%
British Pound	0.529	0.519	0.528	3.77%	10.38%
Euro	0.610	0.597	0.603	3.85%	8.21%
Japanese Yen	112.81	109.55	111.15	4.68%	23.11%
Trade-Weighted Index	66.30	64.30	65.50	2.79%	10.68%
Equity Markets
Australian All Ordinaries	2.4%	-7.3%	3.3%	-1.9%	10.0%
MSCI Australia Value (AUD)	1.3%	-4.7%	7.6%	3.9%	19.6%
MSCI Australia Growth (AUD)	2.4%	-6.6%	0.8%	-3.5%	-8.1%
S&P 500 (USD)	10.5%	-5.0%	-0.8%	4.2%	31.1%
MSCI US Value (USD)	7.4%	-5.2%	1.8%	3.7%	24.1%
MSCI US Growth (USD)	13.9%	-4.5%	-3.8%	4.6%	36.1%
MSCI World (USD)	9.6%	-6.3%	0.8%	3.5%	29.7%
Nikkei (YEN)	16.1%	-12.6%	10.4%	12.0%	67.4%
CSI 300 (CNY)	8.1%	-5.5%	0.2%	2.3%	31.0%
FTSE 100 (GBP)	2.3%	-6.2%	7.0%	2.7%	26.3%
DAX (EUR)	7.1%	-10.3%	3.0%	-1.0%	8.0%
Euro 100 (EUR)	4.4%	-5.9%	4.2%	2.4%	22.9%
MSCI Emerging Markets (USD)	14.7%	-13.0%	5.5%	5.3%	47.5%
Commodities
Iron Ore (USD)	1.2%	8.8%	-5.2%	10.2%	12.5%
Crude Oil WTI U$/BBL	5.6%	53.6%	3.8%	62.2%	82.4%
Gold Bullion $/t oz	-0.1%	-12.0%	4.4%	-12.1%	39.6%

Sources: Quilla, Refinitiv Datastream

Summary

In March, global markets were shaped by escalating geopolitical tensions following the US–Israeli conflict with Iran, and the resulting disruption to the Strait of Hormuz. The partial closure of this critical energy corridor, which typically facilitates around 20% of global oil supply, triggered a significant supply shock. As a result, crude oil prices surged above US$100 per barrel for the first time since 2022, materially shifting inflation expectations and complicating the global monetary policy outlook.

Rising inflation expectations pushed global bond yields higher, as investors increasingly priced in the likelihood that central banks may need to tighten policy further to contain inflationary pressures. Equity markets responded with broad-based declines, with the impact most pronounced in oil-importing regions such as Australia, Asia, and Europe.

In contrast, the United States remained relatively insulated given its position as a net energy exporter.

Domestically, the Reserve Bank of Australia (RBA) raised the cash rate by 25 basis points at its March meeting following a closely contested decision, citing persistent inflation pressures exacerbated by the energy shock. Meanwhile, most major global central banks opted to hold rates steady, awaiting greater clarity on the evolving geopolitical situation.

Australian 10-year bond yields rose sharply, moving above 5%, while the Australian dollar weakened against the US dollar amid a deteriorating global growth outlook. Gold prices declined from their January highs, as investors repositioned portfolios and liquidated positions to meet margin calls.

Selected market returns (%)

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

Financial markets

Global equity markets experienced a pronounced risk-off correction in March, driven by escalating US–Israeli military operations against Iran that culminated in a severe disruption to global energy supplies. Heightened geopolitical uncertainty fueled sharp intra-month volatility, with investor sentiment swinging rapidly between risk-on and risk-off in response to real-time developments and shifting conflict dynamics.

The expected sharp rise in headline inflation, driven by the oil and gas supply shock, triggered concurrent selloffs in both equities and fixed income.

Australian equities

The S&P/ASX All Ordinaries Index fell 7.3% in March, with the market hit by the dual headwinds of the RBA’s second consecutive rate hike and the global energy shock. The sell-off was broad-based, with rate-sensitive sectors bearing the brunt of the move.

The RBA’s decision to raise the cash rate on 17 March weighed heavily on the technology and real estate sectors. The technology sector extended its losing streak to eight consecutive months, ending March down 12.49% and the quarter down approximately 28%. Real estate stocks came under further pressure as bond yields surged above 5%.

The resources sector delivered mixed results. Energy stocks rallied sharply on the back of surging oil prices, with producers benefiting from the conflict-driven price spike. In contrast, gold stocks suffered, following a lower gold price.

Small caps fell disproportionately, with the S&P/ASX Small Ordinaries Index declining further as higher rates and rising input costs increased expectations for tighter margins for smaller companies with less pricing power.

Global equities

Global equity markets diverged markedly in March, with the Middle East conflict creating clear winners and losers across regions and sectors.

In the United States, the S&P 500 fell 5% (USD), recording its worst monthly performance since 2023. Technology stocks led losses, with the Nasdaq declining by over 7% (USD) as rising bond yields compressed valuations for long-duration growth names. The conflict added to existing anxieties about AI monetisation and the technology sector’s earnings trajectory, leading investors to reassess valuations.

Small-cap stocks bore the brunt of the selloff, with the Russell 2000 dropping by over 7% in March.

The decline reflected disproportionate selling of companies with high levels of floating-rate debt and heavy cyclical exposure, who are more sensitive to surging energy costs and faltering growth expectations.

Japanese equities suffered the most severe correction globally. The Nikkei 225 fell 13.2% (JPY), its worst month since the 2008 Global Financial Crisis (GFC), as Japan’s heavy reliance on Middle Eastern oil imports amplified the impact of the supply shock. Rising energy costs and a strengthening yen, driven by safe-haven demand, further pressured export-oriented sectors.

Emerging and European markets surrendered early-2026 gains in March as the Middle East conflict, surging oil prices, and softer economic data took their toll. Both regions fared worse than the US, facing outsize exposure to cyclical sectors and energy costs. Growth forecasts were reassessed as markets absorbed the gravity of oil disruption on economic outlooks.

Commodities

Crude oil was the defining commodity story in March. WTI surged approximately 53.6% to settle above US$100 per barrel, its first close above US$100 since July 2022 and its strongest monthly gain since May 2020.

Gold fell sharply in March, declining approximately 12% (USD) from its January highs near US$5,419 to close around US$4,674 per ounce. The sell-off reflected forced liquidation by leveraged investors facing margin calls in equity and bond markets, as well as a stronger US dollar. Despite the monthly decline, the gold price remained more than 40% above its level a year ago.

Iron ore prices rose 8.8% in March 2026, supported by supply disruptions and elevated freight costs from the Iran conflict, despite weak underlying Chinese steel demand.

Bond markets

Bond markets faced a challenging month as the oil-driven inflation shock pushed yields sharply higher across major economies.

In the US, the 10-year Treasury yield rose approximately 38 basis points to close at 4.32%, its highest level since July 2025. Markets significantly scaled back expectations for the Federal Reserve (the Fed) to cut rates, with some traders beginning to price in the possibility of a rate hike in the fourth quarter of 2026. The Fed held rates steady at its March meeting, with Chair Powell noting that

oil-driven supply shocks were largely beyond the central bank’s control.

In Australia, the 10-year government bond yield surged above 5.0%, its highest since 2011, driven by the RBA’s back-to-back rate hikes and the inflationary implications of higher energy costs.

The 90-day bank bill rate rose in line with the RBA’s hike, with markets pricing in a further increase in May.

Economic developments

The Iran war and the oil shock

The defining event of March was the escalation of the US-Israeli military conflict with Iran, which began with strikes on 28 February and rapidly broadened into a regional confrontation. Within days, Iran retaliated by effectively closing the Strait of Hormuz to commercial shipping, removing a critical chokepoint through which roughly 20% of the world’s seaborne oil had transited.

Beyond energy, the Iran conflict has disrupted supplies of critical industrial inputs: urea prices have surged, threatening crop yields and food security; aluminum production has contracted; and helium shortages pose risks to semiconductor and medical imaging sectors.

The conflict intensified throughout the month. The United States deployed additional carrier strike groups to the region, with reports emerging that the Pentagon was preparing for ground operations. Iran-backed Houthi militants in Yemen also entered the conflict, targeting Israeli and regional shipping.

By month’s end, tentative signals of a willingness to negotiate emerged from both sides, though the situation remained highly fluid. Reports suggested President Trump was open to ending operations even without the full reopening of the strait, while unconfirmed reports indicated Iran was also open to talks. Oil markets, however, remained skeptical of a near-term resolution, and the war premium in energy prices continued to dominate market pricing.

A second hike in a row

The RBA raised the official cash rate by 25 basis points to 4.10% at its March meeting, the second consecutive hike and the third increase in the current tightening cycle. The decision was split 5-4, with the minority preferring to wait for further data given the heightened global uncertainty.

Governor Michele Bullock was unequivocal in the post-decision press conference that inflation was already too high before the Middle East conflict began, and the domestic data had confirmed that demand was outstripping supply. She noted that headline CPI had risen to 3.8% and the labour market remained tighter than expected, with the unemployment rate holding below forecast.

The war in the Middle East introduced a significant complication. Rising fuel prices were expected to feed directly into headline inflation while also squeezing household budgets. Economists warned that CPI could accelerate toward 4.5% in the near term and potentially approach 5% in the second quarter if energy costs remained elevated. Markets moved to price in a third consecutive hike at the May meeting.

Outlook

The global economic outlook has become more clouded in March, with the Middle East conflict introducing a potential stagflationary risk since the post-pandemic period. The surge in oil prices threatens to simultaneously lift inflation and depress economic activity, creating a particularly challenging environment.

For risk assets, the near-term trajectory will be heavily influenced by the resolution or escalation of the Iran conflict. A de-escalation and reopening of the Strait of Hormuz would likely trigger a significant relief rally, particularly in energy-importing markets and across the technology sector, where valuations have compressed on higher discount rates. A prolonged conflict, conversely, would weigh on the global economic growth outlook and corporate earnings growth.

Despite recent volatility, expectations for global corporate earnings remain resilient. Revenue and earnings growth continue to support a positive equity outlook, particularly within the AI theme, where massive capital investment acts as a powerful tailwind. The proliferation of AI is also expected to produce tangible productivity gains, boosting both economic growth and corporate profitability across sectors.

While the medium-term structural case for AI investment remains intact, the market’s attention has shifted decisively toward energy security, inflation, and the policy response. Sector performance is likely to remain uneven until the macro environment stabilises.

We continue to monitor the situation in the Middle East closely, specifically the duration of oil supply disruptions through the Strait of Hormuz and their potential impact on the global and domestic economic trajectory.

Near-term conditions are likely to remain volatile as investors navigate evolving conditions. In this environment, portfolio adaptability and diversification are of utmost importance.

Major market indicators

	31-Mar-26	28-Feb-26	31-Jan-26	Qtr change	1 year change
Interest Rates (at close of period)
Aus 90-day Bank Bills	4.19%	3.96%	3.77%	+48.0	+7.0
Aus 10yr Bond	4.96%	4.76%	4.75%	+24.3	+54.1
US 90-day T-Bill	3.61%	3.59%	3.58%	+4.0	-60.0
US 10 yr Bond	4.32%	3.96%	4.26%	+15.8	+11.0
Currency (against the AUD)
US Dollar	0.685	0.713	0.701	2.71%	9.91%
British Pound	0.519	0.528	0.509	4.30%	7.01%
Euro	0.597	0.603	0.587	4.63%	2.97%
Japanese Yen	109.55	111.15	107.77	4.80%	17.09%
Trade-Weighted Index	64.30	65.50	64.50	3.38%	7.89%
Equity Markets
Australian All Ordinaries	-7.3%	3.3%	1.6%	-2.7%	11.3%
MSCI Australia Value (AUD)	-4.7%	7.6%	2.6%	5.2%	21.4%
MSCI Australia Growth (AUD)	-6.6%	0.8%	-0.4%	-6.2%	-5.5%
S&P 500 (USD)	-5.0%	-0.8%	1.5%	-4.3%	17.8%
MSCI US Value (USD)	-5.2%	1.8%	4.5%	0.8%	11.4%
MSCI US Growth (USD)	-4.5%	-3.8%	-1.9%	-9.9%	22.5%
MSCI World (USD)	-6.3%	0.8%	2.3%	-3.5%	19.4%
Nikkei (YEN)	-12.6%	10.4%	5.9%	2.2%	45.9%
CSI 300 (CNY)	-5.5%	0.2%	1.8%	-3.7%	17.7%
FTSE 100 (GBP)	-6.2%	7.0%	3.0%	3.4%	22.6%
DAX (EUR)	-10.3%	3.0%	0.2%	-7.4%	2.3%
Euro 100 (EUR)	-5.9%	4.2%	3.0%	1.0%	15.5%
MSCI Emerging Markets (USD)	-13.0%	5.5%	8.9%	-0.1%	30.3%
Commodities
Iron Ore (USD)	8.8%	-5.2%	-2.6%	3.1%	5.0%
Crude Oil WTI U$/BBL	53.6%	3.8%	12.6%	59.5%	43.1%
Gold Bullion $/t oz	-12.0%	4.4%	16.3%	-8.1%	47.9%

Sources: Quilla, Refinitiv Datastream

Summary

The rotation away from the United States (US) technology exposure continued in February, with most other major markets outperforming. Korean and Japanese equities led the charge, supported by better-than-expected economic data and continued earnings growth, which is a tailwind for international returns broadly.

Within the United States, the Supreme Court’s ruling striking down emergency tariff powers was negated when the Trump administration signalled that alternative mechanisms would be used. Energy, materials, and industrials continued to attract flows away from mega-cap technology, with the Artificial Intelligence (AI) thematic remaining in a period of earnings validation. Nvidia’s results beat expectations, but the stock fell, reflecting a more cautious investor posture towards AI and the broader technology sector.

Australian equities had a strong month, led by banks, materials and energy. Though the RBA’s rate hike to 3.85% introduced intra-month volatility for rate-sensitive financials and real estate names.

Selected Market Returns (%)

FEBRUARY 2026

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

Financial markets

Global equity markets were mixed in February, posting modest gains, with the MSCI World Index (USD) up 0.76%. The AI thematic remained a key driver of volatility, as the market continued to favour hardware and infrastructure over software names amid concerns regarding the

monetisation of AI. Australian equities outperformed in February, with the reporting season delivering strong results across the major banks and the materials sector. US bond yields declined on the back of softer retail and GDP data, alongside safe-haven demand stemming from tariff-driven market uncertainty.

Australian equities

The S&P/ASX All Ordinaries Index gained 3.34% in February, driven by a strong domestic reporting season and selective strength in commodities. The RBA’s decision to raise the cash rate to 3.85% introduced volatility for rate-sensitive sectors, though this was offset by broad earnings momentum across the market.

The financials sector was a standout contributor to the index. The major banks delivered a resounding beat across key metrics, including revenue, net interest margins, costs, dividends, and credit quality.

The resources sector also contributed positively. Materials stocks were supported by firm copper prices and a positive reporting season for major miners, with BHP reaching record highs following a strong half-year earnings result. Gold producers contributed as the gold price remained near historic highs set in January. In contrast, Iron ore faced headwinds, with prices softening amid subdued Chinese demand.

Rate-sensitive market segments faced headwinds. Real estate stocks came under pressure as bond yields moved higher and the RBA’s rate hike reinforced expectations of a prolonged tightening cycle. Technology and growth names also struggled, with concerns around AI disruption.

The S&P/ASX Small Ordinaries Index returned -2.57% for the month, with losses broad-based across the index after the RBA hiked rates.

Global equities

Global equity markets’ performance was mixed in February, with most major indices outperforming the US as the rotation away from mega-cap technology continued.

European and Japanese equities both extended their recent runs, supported by better-than-expected economic data, fiscal stimulus momentum, and strong corporate earnings. In Japan, political clarity under PM Takaichi and expectations of continued fiscal expansion were additional tailwinds.

The AI thematic remained a source of uncertainty, with Nvidia’s post-earnings retreat reflecting broader investor caution around the pace of earnings uplift from AI investment.

Value-oriented and cyclical sectors continued to attract flows at the expense of long-duration growth names. The S&P 500 returned -0.76% (USD), weighed down by the Software and Services sector, where AI disruption fears caused further angst. The small-cap Russell 2000, in contrast, returned 0.71% (USD), and emerging markets returned 5.51% (USD), the latter supported by AI supply chain strength across Asia.

Commodities

Gold rebounded after a sharp sell-off at the start of February, trading above $5,270 per ounce by month’s end and gaining approximately 4.45% (USD). Silver gained 25.86% (USD), supported by increased retail investor participation, while copper remained stable on electrification and AI infrastructure themes.

West Texas Intermediate crude oil gained 3.8% (USD), reaching a six-month high as escalating US-Iran tensions drove a meaningful risk premium into energy markets.

Bond markets

US and Australian bond markets followed divergent paths in February, reflecting markedly different domestic monetary policy outlooks.

US Treasury yields declined in February as softer spending and activity data raised questions about growth momentum, while renewed tariff-related volatility and safe-haven flows added further support to bonds. The 10-year Treasury yield fell approximately 25 basis points over the month to close at 3.96%.

In Australia, the RBA’s rate hike set a hawkish tone from the outset. Robust employment data and persistent inflation, with headline CPI holding at 3.8% and trimmed mean inflation edging higher, reinforced expectations of further tightening. The Australian 10-year yield closed at approximately 4.65% for the month.

Economic developments

The tariff merry-go-round

The tariff landscape shifted in February, with the Supreme Court ruling that the President’s use of emergency powers to impose reciprocal tariffs was unlawful. The decision initially triggered a sharp risk-on move across equity and currency markets before the administration moved quickly to reimpose levies through an alternative legislative mechanism.

The episode highlighted the degree to which trade policy uncertainty has become a structural feature of the current market environment rather than a transitory concern. While the legal challenge created a brief window of relief, the net outcome left the global trade landscape largely unchanged, and the prospect of further escalation remains. Retaliatory measures from key trading partners, including the European Union and China, continue to be flagged, and the situation remains fluid.

The hike nobody wanted

The RBA’s decision to raise the official cash rate by 25 basis points to 3.85% at its February meeting was a defining moment for monetary policy. The move was the first hike in over two years. The decision reflected the Board’s concern that inflation, having appeared to be on a downward path, has proven more persistent than anticipated.

The data underpinning the decision was difficult to look past. Headline CPI rose to 3.8% in the December quarter, well above the RBA’s 2 to 3% target band, with services inflation and housing costs remaining the most stubborn contributors. Wage growth also came in above expectations for the fourth quarter, reinforcing the view that domestic cost pressures have not yet sufficiently abated. Following the decision, markets moved quickly to price a high probability of a further hike at the May meeting, with the peak in the cash rate now expected to be meaningfully higher than was anticipated late last year.

Outlook

Global economic growth is expected to remain positive, though ongoing geopolitical risks and trade policy uncertainty have introduced a more cautious tone. Resilient labour markets, continued fiscal support, and solid corporate earnings provide an offsetting foundation for risk assets, but the tariff environment remains a significant source of uncertainty.

The AI thematic continues to present a compelling medium-term opportunity, though the market’s response to Nvidia’s February earnings illustrated a meaningful shift in investor focus. The debate has moved beyond near-term earnings delivery and toward questions of monetisation, return on capital, and the durability of hyperscaler spending. The outlook remains constructive where AI investment is beginning to translate into measurable commercial outcomes, but broader sector performance is likely to remain uneven until that earnings uplift becomes more visible across the broader market and sub-sectors within technology, such as software.

Domestically, the RBA’s return to a hiking cycle represents a meaningful shift in the Australian economic backdrop. Rate-sensitive sectors face a more challenging near-term environment, while the resources sector continues to offer some insulation from structural commodity demand and elevated gold prices.

Near-term conditions are likely to remain volatile as investors navigate diverging central bank trajectories, evolving trade policy, rising geopolitical uncertainty, and the ongoing validation of the AI earnings cycle. Portfolio diversification and a focus on earnings quality remain important disciplines in this environment.

Major market indicators

	28-Feb-26	31-Jan-26	31-Dec-25	Qtr change	1 year change
Interest Rates (at close of period)
Aus 90-day Bank Bills	3.96%	3.77%	3.71%	+31.0	-21.0
Aus 10yr Bond	4.65%	4.75%	4.72%	+23.4	+22.7
US 90-day T-Bill	3.59%	3.58%	3.57%	-14.0	-61.0
US 10 yr Bond	3.96%	4.26%	4.16%	-5.5	-23.3
Currency (against the AUD)
US Dollar	0.713	0.701	0.667	8.67%	14.60%
British Pound	0.528	0.509	0.497	6.99%	6.93%
Euro	0.603	0.587	0.570	7.01%	0.85%
Japanese Yen	111.15	107.77	104.53	8.67%	19.00%
Trade-Weighted Index	65.50	64.50	62.20	7.03%	10.08%
Equity Markets
Australian All Ordinaries	3.3%	1.6%	1.3%	6.3%	15.8%
MSCI Australia Value (AUD)	7.6%	2.6%	2.7%	13.4%	24.3%
MSCI Australia Growth (AUD)	0.8%	-0.4%	-0.9%	-0.5%	-4.3%
S&P 500 (USD)	-0.8%	1.5%	0.1%	0.7%	17.0%
MSCI US Value (USD)	1.8%	4.5%	0.8%	7.2%	14.7%
MSCI US Growth (USD)	-3.8%	-1.9%	-0.7%	-6.3%	16.7%
MSCI World (USD)	0.8%	2.3%	0.8%	3.9%	21.8%
Nikkei (YEN)	10.4%	5.9%	0.3%	17.3%	61.5%
CSI 300 (CNY)	0.2%	1.8%	2.5%	4.5%	24.5%
FTSE 100 (GBP)	7.0%	3.0%	2.3%	12.7%	28.1%
DAX (EUR)	3.0%	0.2%	2.7%	6.1%	12.1%
Euro 100 (EUR)	4.2%	3.0%	1.1%	8.5%	20.5%
MSCI Emerging Markets (USD)	5.5%	8.9%	3.0%	18.3%	50.8%
Commodities
Iron Ore (USD)	-5.2%	-2.6%	1.9%	-7.8%	-4.9%
Crude Oil WTI U$/BBL	3.8%	12.6%	-2.3%	16.9%	-4.3%
Gold Bullion $/t oz	4.4%	16.3%	3.0%	21.5%	84.3%

Sources: Quilla, Refinitiv Datastream

Summary

Market performance was broadly positive in January, with heightened geopolitical risks and monetary policy shifts creating intra-month volatility and resulting in some notable capital rotations within markets.

Gold and other precious metals were the standout performers, supported by strong ETF flows throughout the month, notwithstanding a sharp reversal on the last trading day of January. Emerging markets performed strongly, also benefitting from increased capital allocations as well as a weakening US dollar and price appreciation from locally based semiconductor manufacturers. US equity markets rotated toward energy, materials, and industrials, as the artificial intelligence (AI) thematic awaits further validation of an uplift in earnings.

Selected market returns (%)

January 2026

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

Financial markets

Global equity markets rose over January to post modest gains, with the MSCI World Index (USD) up 2.26%. The AI thematic continued to influence markets, with the market preferring hardware over software names. Rising commodity prices also influenced overall market returns, particularly within precious metals. US bond yields increased on the back of firmer labour and inflation data, potentially delaying previously expected near-term rate cuts.

Australian equities

The S&P/ASX All Ordinaries Index made a positive start to the 2026 calendar year, gaining 1.62% in January. Overall market returns were driven primarily by sector rotation, commodity strength, and a reassessment of monetary policy expectations, rather than broad-based risk-on sentiment.

While the ASX delivered modest gains overall, performance was uneven, with index returns heavily influenced by a small number of large resource stocks.

The resources sector was the dominant contributor. Elevated gold prices, supported by geopolitical uncertainty and demand for inflation hedges, underpinned strong performance from gold producers and diversified miners. Strength in copper and other industrial metals further supported materials stocks, with large-cap names such as BHP and Rio Tinto performing well.

By contrast, rising interest rate expectations became a headwind as higher bond yields weighed on equity valuations, particularly for long-duration growth sectors such as technology and REITs. The S&P/ASX Small

Ordinaries Index also gained, returning 2.74%. Performance was strongest in resource-oriented small caps, particularly gold and base-metal explorers and producers, which benefited from elevated commodity prices.

Global equities

Whilst global equity markets trended higher over the month, inflation data across key developed economies, particularly the US, remained firmer than expected, while labour markets remained resilient. This prompted bond markets to react, pushing government bond yields higher. As real yields rose, equity markets began to price less tolerance for elevated multiples, especially in interest-rate-sensitive segments.

Long-duration growth stocks, particularly in technology and consumer discretionary sectors, faced valuation headwinds. In contrast, value-oriented and cyclical sectors such as energy, financials, and industrials attracted flows.

In the US, performance was positive across all major Indices with the S&P 500 Index gaining 1.45% (USD). Small caps also continued their strong run, with the Russell 2000 Index posting positive returns of 5.35% (USD).

Emerging markets returned 8.86% (USD), primarily driven by AI supply chain leadership, a weakening US dollar, and supportive policy shifts in China.

Commodities

Appreciation of the price of gold continued, with the precious metal returning 16.32% (USD) for the month. Momentum buying further amplified gains, with a wave of purchases from speculators adding froth to the rally which exacerbated a pull back on the last day of the month.

West Texas Intermediate (WTI) crude oil also gained 12.64% (USD) as markets grappled with rising geopolitical risks, first with respect to Venezuela and more recently Iran. Oil price gains in January were also supported by production outages in Kazakhstan,

US production freeze offs, and tighter US restrictions on purchases of Russian oil.

Bond markets

US and Australian bond markets were influenced by a repricing of interest rate expectations toward a higher-for-longer outlook.

In the US, firmer inflation data and continued labour market resilience pushed treasury yields higher across the curve, as markets pared back expectations for near-term Federal Reserve rate cuts. The US 10-year treasury yield moved 10bps higher to 4.26%.

Australian bonds followed a similar pattern. Upside surprises in domestic inflation data prompted markets to reassess the likelihood of the Reserve Bank of Australia (RBA) easing, consequently pricing in higher probabilities of monetary tightening. This lifted yields across short and intermediate maturities, while longer-dated bonds remained sensitive to global rate dynamics.

Economic developments

Stubborn inflation

January inflation prints, particularly in the US and Australia, came in firmer than expected, reinforcing concerns of stalling disinflation. January releases drove a material repricing of interest rate expectations, pushing bond yields higher and somewhat weighing on equity valuations, especially in long-duration growth assets.

Domestically, the latest figures showed inflation remaining elevated, with annual headline CPI rising to 3.8% in December, up from 3.4% in November. Underlying inflation also firmed, with the monthly trimmed mean, which removes volatile items, rising 0.2% month-on-month and 3.3% year-on-year. Housing continues to be the largest contributor to CPI, driven by sharp increases in electricity costs, rents, and new dwelling prices, while food and recreation also added upward pressure. The strength in rents and construction costs will make it difficult for overall inflation to return to 2.5% in the near term, particularly with many service categories still rising above 3%.

With inflation still sitting well above the RBA’s 2–3% target range, the data reinforces expectations that the interest-rate cutting cycle has ended unless the labour market deteriorates significantly. As a result, market participants are widely expecting to see the

RBA move to a hiking cycle. In prior meetings, the Board has highlighted that inflation has picked up, although uncertainty remained if this was a temporary spike.

Labour market data

Employment reports showed continued labour market resilience across key developed economies, most notably the US. Strong job growth and wage persistence undermined the case for imminent rate cuts and validated central banks’ cautious stance.

Payroll growth remained solid in the US, the unemployment rate stayed low by historical standards, and participation showed limited deterioration. Importantly for markets, wage growth proved sticky, particularly in the services sectors, signalling ongoing domestic inflation pressure. This combination reduced confidence that inflation would continue to decelerate smoothly and prompted markets to push back expectations for Federal Reserve rate cuts.

Similar dynamics were evident in Australia, where employment growth and low unemployment reinforced the RBA’s cautious stance. Headline labour data suggested demand for labour remained resilient, limiting policymakers’ flexibility.

For investors, the persistence of tight labour conditions mattered less for growth optimism and more for policy credibility where resilient employment implies central banks cannot pivot dovish without risking renewed inflation.

Outlook

Global economic growth is expected to remain resilient but below longer-term trends, supported by broad fiscal stimulus and robust corporate earnings.

Earnings growth is expected to remain a pivotal driver for ongoing equity market performance. As 2026 begins, many major equity markets are benefiting from resilient profit trends, led by the US and parts of Asia.

This trend continues to provide a broadly supportive backdrop for risk assets.

Structural themes, most notably the AI thematic, are reinforcing this outlook. Early signs of revenue acceleration are emerging among a subset of companies, suggesting that recent investment may be starting to translate into commercial outcomes. While confirmation of a durable uplift in earnings is still developing, the medium-term implications are constructive if productivity improvements persist as multi-year growth drivers.

Near-term market conditions are likely to remain volatile as investors respond to shifts in geopolitics, macroeconomic indicators and evolving policy settings. Against this backdrop, portfolio flexibility and diversification remain important disciplines.

Major market indicators

	31-Jan-26	31-Dec-25	30-Nov-25	Qtr change	1 year change
Interest Rates (at close of period)
Aus 90-day Bank Bills	3.77%	3.71%	3.65%	+21.0	-56.0
Aus 10yr Bond	4.81%	4.72%	4.42%	+57.1	+32.4
US 90-day T-Bill	3.58%	3.57%	3.73%	-15.0	-62.0
US 10 yr Bond	4.26%	4.16%	4.02%	+16.4	-28.8
Currency (against the AUD)
US Dollar	0.701	0.667	0.656	7.01%	12.31%
British Pound	0.509	0.497	0.494	2.29%	1.62%
Euro	0.587	0.570	0.564	3.74%	-1.97%
Japanese Yen	107.77	104.53	102.29	6.88%	11.83%
Trade-Weighted Index	64.50	62.20	61.20	5.39%	8.22%
Equity Markets
Australian All Ordinaries	1.6%	1.3%	-2.5%	0.3%	7.6%
MSCI Australia Value (AUD)	2.6%	2.7%	-3.0%	2.2%	12.0%
MSCI Australia Growth (AUD)	-0.4%	-0.9%	-3.8%	-5.0%	-8.9%
S&P 500 (USD)	1.5%	0.1%	0.2%	1.8%	16.3%
MSCI US Value (USD)	4.5%	0.8%	1.8%	7.1%	13.7%
MSCI US Growth (USD)	-1.9%	-0.7%	-1.4%	-4.0%	16.6%
MSCI World (USD)	2.3%	0.8%	0.3%	3.4%	20.1%
Nikkei (YEN)	5.9%	0.3%	-4.1%	1.9%	37.4%
CSI 300 (CNY)	1.8%	2.5%	-2.4%	1.8%	26.6%
FTSE 100 (GBP)	3.0%	2.3%	0.4%	5.7%	22.0%
DAX (EUR)	0.2%	2.7%	-0.5%	2.4%	12.9%
Euro 100 (EUR)	3.0%	1.1%	0.1%	4.2%	18.8%
MSCI Emerging Markets (USD)	8.9%	3.0%	-2.4%	9.5%	43.7%
Commodities
Iron Ore (USD)	-2.6%	1.9%	-0.8%	-1.5%	-1.1%
Crude Oil WTI U$/BBL	12.6%	-2.3%	-5.1%	4.5%	-11.4%
Gold Bullion $/t oz	16.3%	3.0%	5.6%	26.4%	79.0%

Sources: Quilla, Refinitiv Datastream

Important information

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Summary

Market performance was mixed in November, with heightened volatility creating a clear divide between defensive and growth assets. After a sharp mid-month pullback, most major equity indices ended close to flat as sentiment oscillated between strong earnings results and growing caution around artificial intelligence (AI) driven optimism.

Infrastructure was the standout performer, supported by resilient income streams and sustained demand for utilities. Global equities finished broadly flat, while bond yields diverged as differences in rate cycles became more pronounced, with the US outperforming peers. Gold also recovered, edging back toward recent highs around US$4,220.

Selected market returns (%)

NOVEMBER   2025

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

Financial markets

Global equity markets ended flat in November, with the MSCI World Index (USD) up 0.31%, as investors grew more cautious on the AI thematic and questioned the sustainability of recent earnings strength and elevated capital expenditure. US bond yields continued to trend lower, driven by expectations of rate cuts over the next 12 months.

Australian equities

The S&P/ASX All Ordinaries Index fell -2.51% in November, bringing the calendar year-to-date (YTD) return to 5.36%.

The ASX underperformed global peers over the month, driven by a mix of stock-specific pressures and a more challenging

domestic inflation and interest rate backdrop. Commonwealth Bank, which had been trading at stretched valuation levels, retraced sharply and weighed on the broader financials sector. Investor appetite also shifted away from high-valuation growth names, reflecting a more cautious global tone as optimism around the AI cycle moderated.

Despite the weakness in financials and growth sectors, the materials sector provided support, with lithium companies rebounding after a difficult year and gold miners benefiting from higher prices.

The S&P/ASX Small Ordinaries Index fell -1.48%, reflecting the broader market trend as diminishing expectations of rate cuts weighed on sentiment across the small-cap sector.

Global equities

In the US, performance was mixed with the S&P 500 Index edging up 0.25% (USD), the Nasdaq Composite fell -1.51% (USD), while the Russell 2000 Index gained 0.85% (USD).

Global equity markets experienced a volatile month as investors reassessed the durability of the AI-driven rally. Despite record earnings from Nvidia, investors are increasingly demanding clearer evidence that the unprecedented AI capex cycle, spanning data centres, chips, robotics, and cloud infrastructure, can deliver sustainable returns on the significant capital invested.

Emerging markets declined -2.38% (USD) as a stronger US dollar, and the AI-related sell-off weighed on sentiment, with MSCI Korea down -8.00% (USD) and MSCI Taiwan falling -5.01% (USD).

Commodities

Gold rebounded from its fall in October, ending the month up 5.56% (USD). West Texas Intermediate (WTI) crude oil fell -5.10% as markets grappled with a combination of softer demand indicators and rising supply.

Bond markets

Fixed income markets experienced notable swings over the month as investors reassessed the global monetary policy path. In the US, the 10-year Treasury yield drifted 8bps lower to 4.02%, reflecting growing expectations for 3–4 rate cuts by the end of next year. In contrast, Australia’s 10-year bond yield rose 30bps to 4.53%, driven by stubborn domestic inflation and a more hawkish Reserve Bank of Australia (RBA), relative to global peers.

Credit markets held up well, supported by healthy corporate balance sheets and solid corporate earnings trends. However, there is limited room for further spread tightening unless global growth meaningfully re-accelerates.

Economic developments

The economic data blip

The recent 43-day US federal government shutdown resulted in a significant disruption to US data visibility.

The Bureau of Labour Statistics (BLS) confirmed that October’s Employment Report, including the unemployment rate, would be cancelled after the shutdown halted essential data collection. October nonfarm payrolls will be merged into November’s release, while the October CPI report was also cancelled, with figures only to be published where data can be reliably reconstructed alongside November 2025 CPI. The shutdown is expected to weigh on fourth-quarter GDP before contributing to a mechanical rebound in Q1 2026.

The absence of timely information has increased uncertainty around the near-term path of US monetary policy, especially amid concerns about sticky inflation and weakening labour market conditions heading into year-end.

Despite this, markets are currently pricing in an ~ 88% probability of a rate cut at the Federal Reserve’s (Fed) meeting in December.

The new datapoint everyone will be watching

Australia has shifted to a monthly Consumer Price Index (CPI) framework, moving away from the quarterly series to improve the timeliness of inflation monitoring.

The latest figures showed inflation picking up again, with annual headline CPI rising to 3.8% in October, up from 3.6% in September. Underlying inflation also firmed, with the monthly trimmed mean, which removes volatile items, rising 0.3% month-on-month and 3.3% year-on-year. Housing was the largest contributor to the CPI rise, driven by sharp increases in electricity costs, rents, and new dwelling prices, while food and recreation also added upward pressure. The strength in rents and construction costs will make it difficult for overall inflation to return to 2.5% in the near term, particularly with many service categories still rising above 3%.

With inflation still sitting well above the RBA’s 2–3% target range, the data reinforces expectations that the interest-rate cutting cycle has ended unless the labour market deteriorates significantly.

As a result, the RBA held rates steady at its November meeting, with the decision unanimous and no consideration given to a rate cut. The Board highlighted that inflation has picked up, noting that the broader economy is showing signs of improving momentum. Domestic activity is lifting, consumption has firmed, the housing market continues to strengthen, and credit conditions have eased.

Outlook

Ultimately, earnings growth is the primary driver of equity returns.

With most major markets entering 2026 with solid earnings momentum, particularly in the US and parts of Asia, the backdrop for equities remains broadly constructive.

The accelerating AI thematic adds another layer of support, provided that productivity gains, data-centre investment and automation continue to deliver multi-year earnings tailwinds across sectors. While the path is unlikely to be linear, and questions remain around whether the scale of capital expenditure will ultimately generate sufficient returns, the potential for AI to be genuinely transformative offers a supportive narrative for long-term equity growth.

Volatility will remain a feature of markets as investors react to key macro factors, including inflation trends, labour-market data, and the evolving monetary and fiscal policy landscape. In this environment, remaining flexible and maintaining diversification remains essential.

Major market indicators

	30-Nov-25	31-Oct-25	30-Sep-25	Qtr change	1 year change
Interest Rates (at close of period)
Aus 90-day Bank Bills	3.65%	3.56%	3.58%	+4.0	-77.0
Aus 10yr Bond	4.53%	4.23%	4.30%	+25.8	-1.1
US 90-day T-Bill	3.73%	3.73%	3.86%	-32.0	-66.0
US 10 yr Bond	4.02%	4.10%	4.15%	-20.4	-17.5
Currency (against the AUD)
US Dollar	0.656	0.655	0.663	0.20%	0.67%
British Pound	0.494	0.498	0.492	1.90%	-3.74%
Euro	0.564	0.566	0.563	0.64%	-8.56%
Japanese Yen	102.29	100.83	97.81	6.33%	4.76%
Trade-Weighted Index	61.20	61.20	61.30	1.16%	-0.49%
Equity Markets
Australian All Ordinaries	-2.5%	0.5%	-0.5%	-2.6%	5.8%
MSCI Australia Value (AUD)	-3.0%	2.0%	-1.6%	-2.7%	7.0%
MSCI Australia Growth (AUD)	-3.8%	-1.9%	-2.0%	-7.5%	-6.0%
S&P 500 (USD)	0.2%	2.3%	3.6%	6.3%	15.0%
MSCI US Value (USD)	1.8%	-0.9%	1.8%	2.6%	5.0%
MSCI US Growth (USD)	-1.4%	5.1%	5.3%	9.2%	24.0%
MSCI World (USD)	0.3%	2.0%	3.3%	5.7%	17.5%
Nikkei (YEN)	-4.1%	16.7%	5.9%	18.4%	34.1%
CSI 300 (CNY)	-2.4%	0.2%	3.3%	1.1%	18.8%
FTSE 100 (GBP)	0.4%	4.1%	1.8%	6.4%	21.5%
DAX (EUR)	-0.5%	0.3%	-0.1%	-0.3%	21.5%
Euro 100 (EUR)	0.1%	3.1%	4.4%	7.8%	22.5%
MSCI Emerging Markets (USD)	-2.4%	4.2%	7.2%	9.0%	30.3%
Commodities
Iron Ore (USD)	-0.8%	3.7%	-0.7%	2.2%	1.2%
Crude Oil WTI U$/BBL	-5.1%	-2.2%	-1.8%	-9.0%	-14.2%
Gold Bullion $/t oz	5.6%	3.8%	11.4%	22.0%	57.9%

Sources: Quilla, Refinitiv Datastream

Summary

Equity markets strengthened in October, recording solid gains with little weakness across regions. Emerging markets continued to deliver solid performance, led by Asian regions as trade discussions advanced.

Within commodities, Gold continued to rally, topping $US4300 per ounce before experiencing a pullback. Bond markets experienced minor moves as the US Federal Reserve cut interest rates by 25 basis points as expected. In Australia, the Quarterly Consumer Price Index (CPI) release dashed expectations of a rate cut decision at the Reserve Bank of Australia’s (RBA) November meeting.

Selected market returns (%)

OCTOBER    2025

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

KEY MARKET AND ECONOMIC DEVELOPMENTS IN OCTOBER 2025

Financial markets

Global equity markets continued to deliver robust gains in October, with the MSCI World (USD) up 2.02%. Investors were encouraged by developments in trade deal discussions and solid earnings results from US companies. US Bond yields continued to trend lower on Fed easing.

Australian equities

The S&P/ASX All Ordinaries Index rose 0.49% in October, bringing the calendar year-to-date (YTD) return to 9.0%. Gains in the materials and energy sectors offset declines across

the healthcare, consumer discretionary, and information technology sectors. Geopolitical tensions helped boost both the materials and energy sectors. Materials companies reacted to discussions between Presidents Trump and Xi on rare earths, while energy companies benefited from rising oil market tensions following US sanctions on Russian oil suppliers and India’s review of its Russian oil purchases. The healthcare sector was dragged lower by CSL on an earnings downgrade and a delay

to its vaccine business spin-off.

The S&P/ASX Small Ordinaries Index finished the month up +1.89%, as the rally in the materials sector extended to smaller companies on the ASX.

Global equities

October was a positive month across global equity markets, driven by robust corporate earnings and improved investor sentiment regarding US–China trade tensions. In the US, the S&P 500 Index (+2.27% USD), Nasdaq Composite (+4.70% USD), and Russell 2000 Index (+1.76% USD) all posted gains.

US third-quarter 2025 earnings results have been robust to date, with 83% of S&P 500 companies reporting positive Earnings

Per Share (EPS) surprises. However, the magnitude of these surprises remains below long-term averages.

Emerging markets also rallied, with South Korea’s Kospi 200 Index (+20.10% USD) and Taiwan’s FTSE TW50 (+10.62% USD)

recording strong gains, supported by a new trade pact between the US and Korea and continued developments in the artificial intelligence sector.

Commodities

Gold continued to rally through October, reaching new highs and ending the month up 3.78% (USD). Prices reached record highs of $US4379 per ounce before pulling back due to a stronger US dollar and easing trade tensions.

West Texas Intermediate (WTI) crude oil fell -2.23% as investors grappled with the US blacklisting of Russia’s two largest oil producers and OPEC+ considering an output hike.

Rare earths and critical minerals emerged as

a major theme. China expanded its restrictions on rare earth exports, including products manufactured with Chinese components, intensifying global supply chain pressures.

This was reversed later in the month but still drove a surge in investor interest. In response, the US and Australia announced a $4.6 billion partnership to develop critical mineral projects, aiming to reduce reliance on China. This bolstered Australia’s rare earth sector.

Bond markets

US Treasury yields briefly traded below 4% for the first time since July but ended higher as expectations for additional rate cuts eased.

The Fed delivered a 25 basis point cut during the month, though Chair Powell emphasised that another move in December is not assured. The US 10-year government bond yield finished October at 4.1%, down 5 basis points.

Australian 10-year government bond yields were little changed, ending the month at 4.31% after dipping to 4.1% mid-month. A hotter-than- expected inflation print significantly reduced expectations of a November rate cut, while

the US–China trade deal also contributed to upward pressure on yields.

Economic developments

Australian economic data suggests no more rate cuts in 2025

Annual headline inflation rose to 3.2%, above forecasts of 3%, which marks a material upside surprise. The result sees underlying inflation remaining above the RBA’s 2-3% target band.

Further complicating the macroeconomic environment, the unemployment rate rose to 4.5% in September from a revised 4.3% in August. This highlights a softening labour market and challenges the RBA’s forecast of a stable 4.3% rate over the next two and a half years.

Economists now expect no further rate cuts in 2025. The 2026 outlook depends on whether inflation moderates again and how the unemployment rate trends.

The Fed cut the policy rate by 25 basis points

The Federal Reserve (Fed) cut interest rates by 0.25% lowering the target range to 3.75%-4.00%. This was despite headline

inflation rising to 3%. Personal Consumption Expenditures (PCE) inflation is more important to the Fed’s decisions, but the release was delayed due to the ongoing government shutdown. According to economists, the

read-through for PCE inflation is above the Fed’s target of 2%. The Fed cited increased downside risks to employment as the main reason for the further reduction in interest rates. Tension remains between the Fed’s dual mandates as inflation is still high while labour/ employment data are coming in weaker.

The Fed cooled expectations of a further cut in December. Fed Chair Powell suggested there were diverging views among members on the path of monetary policy in the short-term.

In a volatile month on the trade front, President Trump agreed to cut tariffs on Chinese imports by 10% to 47% in exchange for China resuming US soybean purchases and lifting its restrictions on rare-earth exports.

Outlook

While global growth is expected to slow moderately in the coming quarters, fiscal and monetary policy stimulus should provide support for an improving growth outlook. Global equities are entering their historically strongest period. This will likely be supported by solid earnings and corporate balance sheets and further increases in corporate spending on AI initiatives. Volatility will likely remain a characteristic as markets react to several key factors, including inflation and labour market data in both the US and Australia,

that will provide further guidance as to the trajectory of interest rates. Trade relations are also expected to continue to swing investor sentiment, particularly between the US and China. In an evolving investment climate, a flexible approach supported by sound fundamentals is essential for managing resilient portfolios.

Major market indicators

	31-Oct-25	30-Sep-25	31-Aug-25	Quarter change	1 year change
Interest Rates (at close of period)
Aus 90 day Bank Bills	3.65%	3.58%	3.61%	-3.0	-76.0
Aus 10yr Bond	4.31%	4.30%	4.28%	+1.9	+4.3
US 90 day T Bill	3.73%	3.86%	4.05%	-51.0	-71.0
US 10 yr Bond	4.10%	4.15%	4.22%	-26.5	-18.7
Currency (against the AUD)
US Dollar	0.655	0.663	0.655	1.68%	-0.05%
British Pound	0.498	0.492	0.484	2.09%	-1.85%
Euro	0.566	0.563	0.560	0.11%	-6.49%
Japanese Yen	100.83	97.81	96.20	4.11%	0.91%
Trade-Weighted Index	61.20	61.30	60.50	1.49%	-0.49%
Equity Markets
Australian All Ordinaries	0.5%	-0.5%	3.2%	3.1%	12.5%
MSCI Australia Value (AUD)	2.0%	-1.6%	4.4%	4.8%	14.2%
MSCI Australia Growth (AUD)	-1.9%	-2.0%	-2.9%	-6.7%	3.7%
S&P 500 (USD)	2.3%	3.6%	2.0%	8.2%	21.5%
MSCI US Value (USD)	-0.9%	1.8%	2.8%	3.7%	8.8%
MSCI US Growth (USD)	5.1%	5.3%	1.3%	12.1%	34.6%
MSCI World (USD)	2.0%	3.3%	2.6%	8.1%	22.5%
Nikkei (YEN)	16.7%	5.9%	4.1%	28.6%	36.7%
CSI 300 (CNY)	0.2%	3.3%	10.5%	14.4%	22.6%
FTSE 100 (GBP)	4.1%	1.8%	1.2%	7.3%	24.1%
DAX (EUR)	0.3%	-0.1%	-0.7%	-0.4%	25.6%
Euro 100 (EUR)	3.1%	4.4%	0.6%	8.4%	22.3%
MSCI Emerging Markets (USD)	4.2%	7.2%	1.5%	13.3%	28.7%
Commodities
Iron Ore (USD)	3.7%	-0.7%	3.6%	6.6%	3.0%
Crude Oil WTI U$/BBL	-2.9%	-1.8%	-8.5%	-12.8%	-11.8%
Gold Bullion $/t oz	3.8%	11.4%	4.4%	20.7%	45.2%

Sources: Quilla, Refinitiv Datastream

Summary

Equity market returns were mixed in September, with global equity markets delivering reasonably strong gains, while Australian equities experienced a modest decline.  Emerging Market equities were the best performers, led by Asian regions. Bond markets experienced relatively minor moves, and within Commodities, Gold rose sharply.  In the US, the Federal Reserve (the Fed) cut interest rates by 25 basis points, while in Australia, the Reserve Bank of Australia (RBA) kept interest rates on hold.

Selected market returns (%), September 2025

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

Key market and economic developments in September 2025

Financial markets

Global equity markets continued to perform strongly through September.  Emerging Markets delivered particularly strong gains, up 7.18% in USD, with Asia leading the rally due to the strong performance of technology and semiconductor stocks. Bond markets experienced relatively minor movements throughout the month, and Gold had another strong month, rising 11.41%.

Australian equities

The Australian equity market experienced a moderate pullback in September, retreating from August’s record high. Weakness was broad-based across sectors, led by the energy sector, which declined by 10%. Financials also weighed on performance, with the big 4 banks declining amid ongoing concerns around interest rates, consumer sentiment, and valuations. In contrast, gold producers outperformed strongly on the back of record-high gold prices.  Whilst the broad Australian equity market declined 0.54%, small companies delivered strong gains, with the S&P/ASX Small Ordinaries Index finishing the month up 3.44%.

Global equities

Global equity markets advanced in September, extending solid gains for the year to date. In the US, the S&P 500 Index (+3.65%, USD), Nasdaq Composite Index (+5.61%, USD), and Russell 2000 Index (+2.69%, USD) all experienced gains, with the telecommunications and information technology sectors leading the way.

European equities also experienced reasonable gains in September, with the Euro 100 Index (EUR) up 4.4%. Emerging markets were the best performing equity markets during the month, with notable gains coming from South Korea’s Kospi Index (+6.50%) and Taiwanese equities (+7.26%). Growth in artificial intelligence, semiconductors, and digital infrastructure underpinned the rally, with tech leaders such as Taiwan Semiconductor, Alibaba, and Samsung benefiting from surging investment in AI and chip manufacturing.

Commodities

Gold extended its rally in September, climbing toward record highs and delivering its strongest monthly performance in 14 years with an 11.41% gain. The surge was driven by renewed investor demand amid concerns over a potential US government shutdown, softer labour market data, and a weaker US dollar.

Meanwhile, West Texas Intermediate (WTI) crude oil fell 1.8%, marking its second consecutive monthly decline, pressured by surplus supply from OPEC+ and weak demand in China.

Bond markets

US Treasury yields experienced relatively minor declines throughout September as softer than expected employment data signalled a cooling labour market, increasing expectations that the Fed will take a more dovish stance towards rate cuts. The US 10-year government bond yield ended the month at 4.15% down 8 basis points.

Australian 10-year government bond yields rose slightly to 4.31% due to stronger than expected inflation data in August.

Economic developments

The RBA kept rates on hold

The RBA kept the cash rate on hold at 3.60% at its September meeting, with any rate cuts now likely delayed. Stronger than expected inflation data for Q3 2025, indicating a trimmed mean CPI rise of around 0.9% – 1.0% quarter-on-quarter, well above the RBA’s forecast of 0.64%, has added caution to the RBA’s approach.

Private demand is recovering more rapidly than anticipated, supported by rising real household incomes, easing financial conditions, and a strengthening housing market. Labour market conditions remain stable but mildly tight, with unemployment remaining unchanged at 4.2% in August and employment growth slowing slightly.

This cautious stance reflects an evolving outlook where inflation may remain elevated near the upper end of target for some time, but overall economic activity and labour markets signal no immediate need for further tightening.

The Fed cut its policy rate by 25bps

In the US, the Fed cut its policy rate by 25bps on 17 September, in line with expectations, citing signs that economic momentum had slowed in the first half of the year. The Fed reiterated its dual mandate of promoting maximum employment and price stability, noting that risks to the labour market have increased and the broader economic outlook remains uncertain.

Policy decisions from President Trump have added further complexity. Immigration restrictions have created a negative supply shock in the labour market, while tariffs may result in inflationary pressures. Hiring has slowed significantly, though the impact on unemployment has so far been muted due to a shrinking labour force.

The Fed’s latest Summary of Economic Projections pointed to the likelihood of two additional 25bps cuts by year-end, though estimates varied widely. Fed Chair Powell stressed that the Fed remains data-dependent and has no fixed path for future moves.

Outlook

Markets remain supported by resilient company fundamentals and easing monetary policy across key economies, yet policy uncertainty continues to cloud the global outlook. Investor sentiment has improved amid greater policy clarity, yet geopolitical tensions and uneven global growth remain key sources of potential market disruption. In this environment, a patient, flexible investment approach anchored in fundamentals remains essential.

Major market indicators

Source: Quilla, Refinitiv Datastream

Summary

Global and domestic equity markets posted solid gains in August, buoyed by resilient corporate earnings and growing expectations of further interest rate cuts. Commodity performance was mixed, with iron ore and gold advancing while oil retreated. In fixed income, US bond yields declined as markets brought forward expectations of rate cuts, though investors remained cautious, awaiting clearer economic signals before factoring in additional policy adjustments.

Selected market returns (%), August 2025

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

Key market and economic developments in August 2025

Financial markets

Global equity markets continued to deliver strong performances in August, with the MSCI World (USD) up 2.6%. The broad rally can be attributed to improved investor sentiment due to the increased probability of interest rate cuts, as well as solid company earnings continuing to support equity markets. US bond yields declined, driven by weaker-than-expected employment data.

Australian equities

The ASX 200 rose 3.2% in August, bringing the calendar year-to-date (YTD) return to 12.3%. The company reporting season dominated the news flow and share price movements, with most sectors delivering positive returns for the month. The strongest returns came from the Materials, Consumer Discretionary and Utilities sectors, delivering returns of 9.2%, 7.6% and 5.3% respectively. Healthcare and Information Technology underperformed, returning -13.2% and -1.7% respectively.

The reporting season delivered generally strong earnings, with a greater number of companies exceeding profit expectations than falling short, underscoring the resilience of the Australian economy. Other notable takeaways included earnings beats largely driven by stronger-than-expected margins rather than revenue growth, highlighting companies’ effective cost management, while healthy balance sheets supported a surprising rise in dividends and share buybacks.

Global equities

Broad strength was seen across global equity markets, driven by robust corporate earnings and improved investor sentiment. In the US, the S&P 500 Index (USD), Nasdaq Composite (USD), and Russell 2000 Index (USD) rose 2.0%, 1.6% and 7.0% respectively, signalling a rebound in smaller companies that had lagged in performance recently. On a sector basis, Consumer Staples and Telecommunications were the best performing, returning 4.2% and 3.4% respectively.

Second quarter 2025 earnings from US companies exceeded expectations, alleviating concerns over a potential slowdown in economic growth. 81% of the S&P 500 companies reported a positive earnings and revenue surprise, the highest since the second quarter of 2021. The yearly earnings growth rate rose to11.9% with technology and communication services companies providing a significant proportion of the growth.

European equity markets were a laggard, with the Euro 100 (EUR) rising 0.6% due to uncertainty around the outcome of tariff negotiations between the US and Europe. Conversely, the Nikkei (JPY) increased by 4.1% driven by the momentum of the US and Japan reaching a trade deal and thus reducing uncertainty for investors. The Chinese market continued its rally, with the Hang Seng Index (HKD) returning 1.3%, driven by positive progress in trade talks between the US and China, as well as stimulative policies from the Chinese government.

Commodities

Gold performed strongly in August, returning 4.4% resuming its strong run driven by investor demand.

Iron ore continued its recent recovery, up 3.6% fuelled by Chinese plans to build a mega hydroelectric dam with an estimated cost of $250bn.

The lithium price also staged a recovery following the announcement that Contemporary Amperex Technology (CATL), China’s largest battery manufacturer, suspended operations at a major mine. The unexpected halt sparked immediate concerns over supply and fuelled speculation about potential broader production disruptions.

West Texas Intermediate (WTI) Crude fell 8.5% in anticipation of higher supply after OPEC+ announced it would reverse its voluntary production cuts a year earlier than planned.

Bond markets

US Treasury yields fell in August as softer-than-expected employment data signalled a cooling labour market, increasing expectations that the Federal Reserve (Fed) will implement a rate cut in September. The US 10-year government bond yield ended the month at 4.22% down 13 basis points.

The Australian 10-year government bond yield rose slightly to 4.29% as the RBA delivered an expected rate cut in August.

Economic developments

Reserve Bank of Australia (RBA) cuts in August

The RBA reduced the cash rate by 0.25% to 3.60%, as the Board became confident that inflation has sustainably moderated. Commentary from the RBA indicates that they are now comfortable with the level of inflation and that their policy priority is maintaining full employment in the economy.

The unemployment rate fell from 4.3% in June to 4.2% in July, as forecast by economists. Trimmed mean inflation, however, increased from 2.1% to 2.7%, well above forecasts of 2.3% as it was impacted by an increase in travel and electricity prices.

The RBA remains focused on economic data to inform its future policy decisions, and the market is currently pricing in one additional rate cut over the remainder of 2025 and two additional rate cuts in the next 12 months.

The Federal Reserve (Fed) is expected to cut in September

US equity markets and bond yields fell sharply at the start of August following data revisions that indicated that the labour market had weakened more than previously anticipated. This led investors to raise the probability of a likely rate cut in September. Fed Chair Powell highlighted the softer employment trends, signalling that the labour market would be a key focus for upcoming policy decisions. While some Fed governors have publicly supported a September rate reduction, others remain cautious, prioritising ongoing inflationary pressures over the slowing jobs market.

Producer price inflation (PPI) rose, suggesting that higher import costs driven in part by US tariffs may soon feed into consumer prices. So far, broad based increases in consumer prices have been limited, but rising producer costs could be passed on in the coming months. Trade policy uncertainty remains elevated, with several of President Trump’s tariffs facing legal challenges, including rulings against the use of the International Emergency Economic Powers Act. Concerns over Fed independence have also been raised following the controversial dismissal of Governor Lisa Cook, which may create a vacancy that could influence the Fed’s future policy direction.

The upcoming September employment report will be closely monitored, likely playing a decisive role in the timing and magnitude of the Fed’s next rate adjustment.

Outlook

Markets remain supported by resilient company fundamentals and easing monetary policy across key economies, yet policy uncertainty continues to cloud the global outlook. Investor sentiment has improved amid greater policy clarity, yet geopolitical tensions, evolving central bank stances, and uneven global growth remain key sources of potential market disruption. In this environment, a patient, flexible investment approach anchored in fundamentals remains essential.

Major market indicators

Summary

Global and domestic equity markets delivered strong performance in July, supported by resilient company fundamentals and improved investor sentiment amid greater clarity on US trade tariffs. Commodity prices rallied in response to newly announced tariff measures, while bond markets remained stable as central banks adopted a more cautious stance, awaiting clearer evidence on how tariffs may influence inflation before adjusting policy.

Selected market returns (%), July 2025

Sources: *FTSE EPRA/NAREIT DEVELOPED, **FTSE Global Core Infrastructure 50/50 Index

Key market and economic developments in July 2025

Financial markets

Global equity markets continued to deliver strong performance in July, with the MSCI World (USD) up 1.3%. The broad rally can be attributed to improved investor sentiment due to greater clarity on US tariffs, as well as company earnings continuing to support equity markets. US bond yields remained stable, grappling between a slower growth outlook and the potential for a resurgence in inflation.

Australian equities

The ASX 200 rose 2.9% in July, bringing the calendar year-to-date (YTD) return to 6.6%. Most sectors saw positive gains in July, led by Health Care at 6.9% with strong returns from the likes of CSL and Pro Medicus. The Energy, Utilities and Materials sectors were also strong contributors, delivering returns of 4.4%, 5.7%, and 9.2% respectively.

Consumer Staples and Financials underperformed, returning -1.9% and -3.4% respectively. Financials were weak following the Reserve Bank of Australia’s surprise decision to hold rates steady rather than cut as widely expected.

Global equities

Broad strength was seen across global equity markets, driven by robust corporate earnings and improved investor sentiment. In the US, the S&P 500 Index (USD), Nasdaq Composite (USD), and Russell 2000 Index (USD) rose 2.2%, 3.7% and 1.7% respectively in July, indicating a broad rally that benefitted larger and smaller companies. On a sector basis, the Technology sector led the rally, driven by a resurgence in the Artificial Intelligence (AI) trade, followed by Industrials, where defence stocks were boosted from higher federal defence spending.

European equity markets were a laggard, with the Euro 100 (EUR) rising 1.0% due to uncertainty around the outcome of tariff negotiations between the US and Europe. Conversely, the Nikkei (JPY) increased by 1.4% driven by the US and Japan reaching a trade deal and thus reducing uncertainty for investors. The Chinese market continued its rally, with the Hang Seng Index (HKD) returning 3.1%, driven by positive progress in trade talks between the US and China, as well as stimulative policies from the Chinese government.

Commodities

Gold saw muted performance in July, returning 0.4% due to markets being in a risk-on environment. Industrial metals such as steel and copper saw much stronger price action, with the former rising 6.5% driven by the US announcing 25 to 50% tariffs on steel imports. The latter saw an intra-month high of 14.7% before retreating to being down -12.9% for the month, as an initially touted 50% copper tariff was scaled back to just apply to copper pipes and wiring. West Texas Intermediate (WTI) Crude rose by 6.1% after Trump threatened to impose sanctions on Russian oil if Russia did not agree to a ceasefire with Ukraine by August 30^th.

Bond markets

US bond markets were flat, whilst yields rose slightly in Australia. The US 10-year government bond yield ended the month at 4.36% up 13 basis points. The increase in the US core Consumer Price Index (CPI) from 2.8% in May to 2.9% in June, and the US Federal Reserve’s (Fed) indication of no rate hikes in the short-term, left US yields rangebound.

The Australian 10-year government bond yield rose to 4.32% rising 11 basis points.   Expectations for an RBA rate cut did not transpire, resulting in a recalibration of market expectations and yields remaining elevated.

Economic developments

RBA paused in July, but an easing bias remains intact

The RBA left the cash rate unchanged at 3.85%, citing continued moderation of inflation as a positive. This was countered by heightened uncertainty driven by US tariffs and tight Australian labour market conditions, which culminated in a decision to leave rates unchanged.

The unemployment rate rose from 4.1% in May to 4.3% in June, coming in above expectations. Trimmed mean inflation, however, eased from 2.9% in Q1 to 2.7% in Q2, in line with expectations.

The RBA remains focused on economic data to inform its future policy decisions, and the trajectory of these key economic indicators is supportive of a rate cut in August. The market is currently pricing in two additional rate cuts over the remainder of 2025.

US continues to finalise trade deals

The US announced several important trade deals with various countries during the month. These included a 20% tariff on Vietnamese exports, a 15% tariff on Japanese, South Korean and European exports and a 25% tariff on Indian. The Trump administration continues to engage in trade talks with other major trade partners, including China and India. The effects of Trump’s tariff policies on the US economy are starting to be observed, such as the US goods trade deficit reducing 10% month-on-month to $86 billion in June, as well as core inflation rising from 2.8% in May to 2.9% in June.

On July 30^th, the Fed held rates steady at 4.25-4.50%, citing a strong labour market and inflation concerns remaining elevated. The Fed also reiterated its goal of returning inflation to its 2% objective. However, weak job numbers released on August 1^st caused market expectations to reset following the Fed’s rate decision, and the probability for three rate cuts by December 2025 increased to 52.8%. Trump continues to apply pressure on the Fed to cut rates, and it is notable that two members of the Federal Open Market Committee (FOMC) voted in favour of cutting rates.

Outlook

Markets remain supported by resilient company fundamentals and a softening inflation trajectory across key economies, yet policy uncertainty continues to cloud the global outlook. Investor sentiment has improved amid greater policy clarity, yet geopolitical tensions, evolving central bank stances, and uneven global growth remain key sources of potential market disruption. In this environment, a patient, flexible investment approach anchored in fundamentals remains essential.

Major market indicators

	31-Jul-25	30-Jun-25	31-May-25	Qtr change	1 year change
Interest Rates (at close of period)
Aus 90 day Bank Bills	3.68%	3.69%	3.78%	-34.0	-78.0
Aus 10yr Bond	4.32%	4.21%	4.35%	+5.1	-0.8
US 90 day T Bill	4.24%	4.24%	4.25%	+4.0	-91.0
US 10 yr Bond	4.36%	4.23%	4.39%	+20.4	+30.5
Currency (against the AUD)
US Dollar	0.644	0.655	0.644	0.63%	-1.40%
British Pound	0.488	0.477	0.478	1.86%	-3.48%
Euro	0.566	0.559	0.567	0.34%	-5.67%
Japanese Yen	96.85	94.73	92.70	5.69%	-1.44%
Trade-Weighted Index	60.30	60.10	59.60	0.67%	-1.79%
Equity Markets
Australian All Ordinaries	2.6%	1.4%	4.2%	8.4%	11.9%
MSCI Australia Value (AUD)	2.9%	1.5%	3.0%	7.5%	10.8%
MSCI Australia Growth (AUD)	1.0%	1.6%	4.9%	7.5%	13.1%
S&P 500 (USD)	2.2%	5.1%	6.3%	14.2%	16.3%
MSCI US Value (USD)	0.5%	4.5%	2.7%	7.8%	8.6%
MSCI US Growth (USD)	3.9%	5.8%	10.0%	20.9%	25.1%
MSCI World (USD)	1.3%	4.3%	6.0%	12.0%	16.2%
Nikkei (YEN)	1.4%	6.8%	5.3%	14.1%	7.1%
CSI 300 (CNY)	4.3%	3.3%	2.0%	9.9%	21.7%
FTSE 100 (GBP)	4.3%	0.0%	3.8%	8.4%	13.2%
DAX (EUR)	0.7%	-0.4%	6.7%	7.0%	30.0%
Euro 100 (EUR)	1.0%	-0.5%	5.8%	6.3%	9.9%
MSCI Emerging Markets (USD)	2.0%	6.1%	4.3%	12.9%	17.9%
Commodities
Iron Ore (USD)	6.5%	-2.1%	-1.6%	4.3%	-3.4%
Crude Oil WTI U$/BBL	6.1%	7.9%	3.2%	14.5%	-11.3%
Gold Bullion $/t oz	0.4%	0.0%	-0.7%	0.3%	36.1%

Sources: Quilla, Refinitiv Datastream