Economic Update - July 2026

Markets Move Higher as Global Tensions Ease

June was a generally positive month for financial markets, supported by easing geopolitical tensions and improving investor confidence. A peace agreement between the United States and Iran helped reduce concerns about disruptions to global energy supplies, leading to lower oil prices and easing some inflation pressures.

At the same time, investors remained focused on economic data, company earnings and the outlook for interest rates, which continue to be major influences on market performance.

Australian Shares: A Mixed Picture

Australian shares recorded modest gains during June, with the S&P/ASX 200 Index rising 0.7%.

The strongest performing sectors were:

• Healthcare

• Consumer Staples

• Consumer Discretionary

These sectors benefited from investors favouring businesses perceived as resilient and higher quality amid ongoing economic uncertainty.

Not all areas of the market performed well. Materials and Energy sectors declined as commodity prices weakened, including falls in iron ore, copper and oil prices. Smaller Australian companies also underperformed, partly because many are exposed to the resources sector.

Looking ahead, the Reserve Bank of Australia (RBA) remains focused on managing inflation. While higher interest rates and softer housing conditions are slowing parts of the economy, employment remains relatively strong and consumer spending has been more resilient than many expected.

International Shares: Performance Broadens Beyond Technology

Global share market performance varied by region during June.

European and Japanese markets delivered solid gains, supported by lower energy prices and improving economic sentiment. Global smaller companies also performed strongly as investor interest broadened beyond the large technology companies that have dominated returns in recent years.

In contrast, US shares were slightly weaker as technology sectors experienced increased volatility after a prolonged period of strong gains.

A key development was the US Federal Reserve's continued focus on bringing inflation back under control. Markets are increasingly assessing the possibility of higher US interest rates over the coming years if inflation remains persistent.

Despite this, strong corporate earnings, healthy profit margins, resilient consumer spending and steady employment continue to support the US economy.

Emerging Markets Face Uneven Conditions

Emerging markets generated positive overall returns during the month.

However, performance varied significantly between countries. While several markets benefitted from improving global conditions, China remained a notable weak spot. Concerns about its economic outlook continued to weigh on investor sentiment and market returns.

Property and Infrastructure Benefit from Stability

Property and infrastructure assets performed well during June.

Global listed property was supported by lower volatility in bond markets and improving sentiment towards assets that tend to be sensitive to interest rate movements.

Infrastructure assets also delivered positive returns, reflecting continued demand for essential services and the relatively stable earnings often associated with these businesses.

Australian listed property enjoyed a particularly strong quarter, extending its positive momentum.

Fixed Interest Provides Positive Returns

Bond markets delivered positive returns as inflation concerns eased somewhat and central banks left interest rates unchanged during the month.

Australian bonds performed particularly well, supported by falling government bond yields. Global fixed interest markets also generated modest gains despite some upward pressure on US bond yields.

Credit markets remained resilient, with investors continuing to find support in generally stable corporate financial conditions and steady market sentiment.

What Markets Are Watching Next

As we move into the second half of 2026, several key themes are likely to remain in focus:

• Inflation trends in Australia and the United States.

• Future interest rate decisions by the RBA and US Federal Reserve.

• The strength of consumer spending and employment markets.

• Corporate earnings and profit growth.

• Ongoing developments in global geopolitical and energy markets.

While the easing of geopolitical tensions has improved market confidence (which now looks to be short-lived), central banks remain focused on controlling inflation. How economies respond to current interest rate settings, and whether inflation continues to moderate, will likely play an important role in shaping market conditions over the months ahead.

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