Economic Update - April 2026

March 2026 proved to be one of the most volatile months for financial markets in recent years, as geopolitical shocks, stubborn inflation and tightening financial conditions combined to deliver sharp losses across most asset classes.

At the centre of market turbulence was a rapid escalation in Middle Eastern conflict and the closure of a major global shipping lane, which sent energy prices soaring to levels not seen since 2020. This supply shock reignited inflation concerns globally, forcing central banks to remain—or become even more—restrictive just as economic growth momentum slowed.

While energy producers thrived in this environment, most equity sectors struggled under the weight of rising interest rates, higher costs and deteriorating investor risk appetite.

Market Overview

• Australian shares fell sharply, with the S&P/ASX 200 down 7.1%, as higher rates and cost pressures weighed on most sectors.

• Global equities declined, led by losses in the US, Europe and Japan.

• Emerging markets underperformed, dragged down by ongoing weakness in China.

• Bond markets struggled as yields rose globally.

• Commodities surged, driven by a more than 50% jump in oil prices.

Volatility was elevated across almost all asset classes as investors reassessed inflation risks, growth prospects and central bank policy expectations.

Australian Equity Sectors: Winners and Losers

Energy (+20.4%)

✔ Benefited from surging oil prices and supply disruptions

✖ Greater geopolitical and policy risk ahead

Utilities (+4.9%)

✔ Higher electricity prices and defensive demand

✖ Rising funding costs as bond yields lifted

Consumer Staples (+1.7%)

✔ Steady demand amid cost‑of‑living pressures

✖ Margin pressure from higher input costs

Materials (-13.0%)

✔ Iron ore recovered modestly late in the month

✖ Broad sell‑off and weaker copper and gold prices

Information Technology (-12.5%)

✔ Long‑term growth themes intact

✖ Valuations pressured by higher interest rates

A‑REITs (-11.2%)

✔ Inflation‑linked income longer term

✖ Higher rates weighed on property valuations

Global Markets: The Same Challenges, Amplified

United States

US equities recorded their third monthly decline in four months, reflecting:

• Sticky inflation data, particularly in core measures.

• Slowing economic growth, with GDP momentum weakening.

• Reduced expectations for near‑term interest rate cuts.

Europe and Japan

• European equity markets sold off sharply as bond yields surged.

• Japan’s market reversed earlier gains, pressured by higher oil import costs and rate‑hike expectations.

Emerging Markets

China remained a major drag on emerging market performance:

• Policy makers set a restrained 4.5–5.0% growth target.

• Property sector contraction continued.

• Consumer demand remained weak despite improving manufacturing activity.

Fixed Income: Rising Yields, Negative Returns

March was a difficult month for bond investors globally. Key pressures included:

• Higher inflation expectations driven by the energy shock.

• Increased government borrowing needs.

• Central banks maintaining restrictive stance.

Australian 10‑year yields rose close to 5%, following the RBA’s 25‑basis‑point rate hike to 4.10%, while US and European yields also climbed sharply.

Key Economic Drivers

• Inflation remains stubborn, driven by energy and housing costs.

• The RBA raised rates to 4.10%, reinforcing a restrictive policy stance.

• Central banks globally signalled that interest rates will stay higher for longer.

• Growth momentum is slowing, particularly in the US and China.

What Markets Are Watching Next

• Whether energy prices stay elevated

• How long central banks keep policy tight

• Signs of further economic slowdown—or resilience

• Ongoing geopolitical developments

In summary, March 2026 reinforced a key lesson: markets are being driven by macro forces rather than company‑specific fundamentals. Inflation, energy prices and interest rates are once again the dominant drivers of returns.

While short‑term volatility remains elevated, periods like this often reward disciplined diversification, an emphasis on quality and a clear understanding of how different assets behave under inflationary pressure.

As always, staying invested with a long‑term perspective—while remaining mindful of risk—continues to matter more than trying to time the market through headlines.

Thanks to our research partners at Lonsec for assisting with the preparation of this Economic Update.