Quarterly Compass — June Quarter 2026
What happened in investment markets, and what it means for long-term investors.
Covering 1 April to 30 June 2026
Opening Perspective
The June quarter was a strong one for share markets, and close to a mirror image of the quarter before it. In the March quarter, conflict in the Middle East drove oil prices sharply higher and share markets lower. By the end of June, oil had fallen roughly 38%, shares had more than recovered, and several major markets closed at record highs [1].
That reversal deserves some attention. Nothing about the world became simpler between March and June. Australian inflation remains above the Reserve Bank’s target band, and interest rates have not moved [2][3]. What changed was one specific concern — that a prolonged conflict would keep energy expensive — and markets responded to its fading with considerable force.
The Quarter at a Glance
| Global shares | Strong. Several major markets reached record highs, led by technology [1] |
| Emerging markets | The standout: Morningstar’s emerging markets index rose 22.4%, driven largely by South Korean memory-chip manufacturers [1] |
| Australian shares | Rose. Consumer-facing companies and listed property both did well [2] |
| Fixed interest | Weak. Yields rose, so bond prices fell [1] |
| Interest rates | The RBA held the cash rate at 4.35% and signalled continued concern about inflation [2] |
| Inflation | Above target. Headline 4.0% and trimmed mean 3.6% for the year to May 2026 [3] |
| Commodities | Down 8.1%, with oil down about 38% as supply fears eased [1] |
| Gold | Retreated from earlier highs [1] |
These are market returns, not the return of any individual portfolio. What you experienced depends on your own mix of investments, your timing and your circumstances.
What Moved Markets
What happened. Conflict involving Iran began in February 2026 and drove an oil price spike by March [1]. Investors expected prolonged supply disruption, which would raise the cost of fuel, freight and manufacturing — in other words, more inflation. During the June quarter those fears eased and oil fell roughly 38% [1]. Investors returned to shares, and technology companies benefited most, helped by continued enthusiasm for artificial intelligence and particularly the manufacturers of the memory chips those systems require [1].
The likely explanation. Most commentary links the two directly: the oil shock had been suppressing share prices and lifting inflation expectations, so its reversal reversed both effects [1][2]. That is reasonable and widely shared. It is also tidier than markets usually justify — company earnings, investor sentiment and rate expectations were all shifting simultaneously.
What remains unresolved. The conflict has not ended, and commentators noted that renewed disruption could push oil back up [1][2]. Markets also tended to respond more enthusiastically to positive developments than to setbacks during the quarter [2].
What was mostly noise. The size of the swing. A weak quarter followed by a strong one is not a change in the long-term outlook for corporate profits — it is largely the same businesses being repriced twice as one fear arrived and then faded.
Australia
Inflation is proving persistent rather than merely slow to fall. For the year to May 2026, headline inflation was 4.0% and the trimmed mean — which excludes the most volatile price movements and is the measure the RBA watches most closely — was 3.6% [3]. Both sit above the 2–3% target band and above their own long-run averages of around 3.0% [3].
The composition matters. Prices for imported goods rose 2.5% over the year, while domestically produced goods and services rose 4.7% [3]. Domestic inflation is harder for a central bank to influence quickly, because it reflects wages, rents and local demand rather than global prices.
Rates held. The RBA kept the cash rate at 4.35%, and its statement leaned towards inflation concern rather than growth concern. It has not signalled cuts [2].
Growth is softening. Unemployment was 4.4% in May 2026, up from recent lows, with wage growth of 3.2% in the March quarter [3]. Households have been drawing down savings, and spending has been growing faster than incomes [2]. Business investment has been supported by data-centre construction — the same global technology trend driving share markets [2].
This combination is genuinely difficult. Inflation above target makes cuts hard to justify; a softening economy makes increases hard to justify.
Policy. The May 2026 Federal Budget kept spending high, with deficits projected across the forward estimates, and included tax changes that have had a visible effect on housing and on how investors view property [2].
Companies. Consumer discretionary shares rallied, and listed property benefited from a fall in longer-term Australian interest rates — property companies typically carry debt, so lower long-term rates help them [2]. Australian banks remain expensive relative to international peers, which some commentators see as a vulnerability [2].
The Australian dollar. We do not have reliable data on its movement over the quarter and will not speculate. It matters, though: a falling Australian dollar raises the value of overseas investments in Australian dollar terms, and a rising one lowers it — an effect that can exceed the underlying market movement over short periods.
Around the World
Higher for longer. At their June meetings, major central banks reinforced the expectation that rates will stay elevated. The European Central Bank raised rates by 0.25%; the Bank of Japan lifted its policy rate to 1%, the highest since 1995, ending a very long era of near-zero rates; the US Federal Reserve held at 3.63% but shifted its projections towards possible increases later in the year [1]. For most of the past two years the market conversation was about when rates would fall. This quarter it was about whether they might rise.
Government borrowing costs. At 30 June 2026, ten-year government bond yields were 4.83% in the United Kingdom, 4.74% in Australia, 4.44% in the United States, 2.90% in Germany and 2.64% in Japan. Japan’s ten-year yield reached 2.8% during the period, a thirty-year high [1].
Concentrated returns. The US technology sector rose 32.1% for the quarter [1]. In emerging markets, a large share of the 22.4% gain came from South Korean chip manufacturers [1]. Meanwhile, over the first half of 2026, share markets in China, India and South Africa fell, with China expected to grow more slowly than historically [1].
Corporate borrowing costs are unusually low. The additional interest companies pay relative to governments — the credit spread — narrowed further and is near record lows for some categories of borrower [2]. That reflects investor confidence. It also means investors are currently being paid very little for the risk that a borrower fails to repay. Commentary specifically identified private credit, which is lending outside public markets and harder to value or sell quickly, as an area of concern [2].
How Different Investments Behaved
The quarter was an unusually clear illustration of why diversified portfolios hold assets that do not move together.
Growth shares beat value shares by roughly 26 percentage points globally [1]. Growth companies are those expected to expand rapidly, and many technology companies sit in this group. Value companies trade at lower prices relative to their earnings or assets, and banks, miners and utilities often sit here. A gap of that size in a single quarter is very wide by historical standards.
International shares generally beat Australian shares, since Australia’s market holds relatively few large technology companies and many banks and miners [1][2].
Emerging markets were the strongest major category — and among the most concentrated in what drove them [1]. A return sourced from one industry in one or two countries is a different proposition from one drawn from many places.
Bonds had a poor quarter. A bond is a loan to a government or company paying a fixed rate of interest. When market interest rates rise, newly issued bonds pay more, making existing lower-rate bonds less attractive, so their prices fall. Yields rose over the quarter, so bond prices fell [1]. A negative quarter for a bond fund in a rising-rate environment is not a failure — it is bonds behaving as bonds behave. Their most valuable contribution to a portfolio typically comes when share markets fall sharply, which is not what happened here.
Cash produced steady, unremarkable returns with the cash rate at 4.35% [2].
Gold retreated from its highs, and gold-mining shares were among the weakest categories [1]. Gold is generally held not to produce returns in strong quarters but as an asset that may behave differently from shares when markets are stressed. This quarter was not stressed.
Commodities fell 8.1%, and energy shares fell 12.5% for the quarter after having been the strongest performers three months earlier [1].
What We Are Watching
1. Australian inflation and the RBA’s next move
Why it matters: the cash rate affects mortgages, business borrowing, cash and term deposit returns, bond prices and company profits. Could improve: services and rent inflation easing as the economy slows, allowing a shift towards cuts [3]. Could deteriorate: inflation staying above target while growth weakens, leaving no comfortable option. One commentator sees a rise to 4.6% later in 2026 as possible [2]. Renewed oil disruption would add to this pressure [1].
2. How much of global returns rests on a few technology companies
Why it matters: technology rose 32.1% in the quarter and has led returns for some time [1]. When much of a market’s return comes from one theme, its risk is more concentrated than the number of companies suggests. Could improve: AI investment translating into growing profits across a widening set of companies. Could deteriorate: expectations are high. Disappointing earnings or slower spending on chips and data centres would affect a large share of global market value — and Australian business investment, which data-centre construction is currently supporting [2].
3. Credit spreads near record lows
Why it matters: many diversified portfolios hold corporate bonds for income. When the extra return for lending to companies rather than governments is near record lows, the potential reward is small and the potential loss if conditions turn is not [2]. Could improve: a stable economy with low default rates would let these investments keep delivering steady income. Could deteriorate: slower growth would widen spreads and reduce the prices of existing corporate bonds. Private credit has been specifically flagged [2].
4. Australian housing and the May 2026 tax changes
Why it matters: housing is the largest asset most Australian households hold, a major influence on confidence and spending, and central to banks — which are a large part of the Australian share market [2]. Could improve: a modest, orderly price adjustment improving affordability without damaging household finances or bank loan books. Could deteriorate: asset markets sometimes overshoot when rules change. A sharper fall would hit confidence and could weigh on bank shares, which are expensive relative to international peers [2].
Closing Perspective
Read only the March quarter commentary and you would have finished it concerned about conflict, oil and inflation. Read only this one and you might finish it reassured by record highs and cheaper energy. Both quarters were three months long, and both described the same world.
That is the honest case for a long-term, diversified approach. Not that markets always rise, and not that volatility is unimportant — falls are unpleasant and genuinely reduce wealth while they persist — but that the information arriving each quarter is considerably less useful for decision-making than it feels at the time.
It is worth ending on what has genuinely improved. This quarter showed how quickly a recovery can arrive: the March quarter’s losses were recovered and surpassed within three months, with no signal beforehand that the turn had come [1]. Markets rarely announce their better periods in advance, which is an argument for being invested through them rather than waiting for confirmation.
The other improvement is quieter but more durable. For the first time in well over a decade, the defensive part of a portfolio is being properly paid. Cash earns 4.35% [2], and Australian ten-year government bonds yield 4.74% [1]. Higher yields were uncomfortable while they were rising, because bond prices fell as they went. But they leave investors with a materially better starting point than the near-zero rates of a few years ago, and they mean income can do real work alongside capital growth. That is a genuine and lasting change in the conditions long-term investors face.
Important Information
The information in this publication is general information only and does not take into account your personal objectives, financial situation or needs. It is not intended to be personal financial advice. Before acting on any information, you should consider its appropriateness for your circumstances and speak with your financial adviser. Investment values and returns can rise and fall, and past performance is not a reliable indicator of future performance.
Market and index returns described here are the returns of those markets or indexes, not of any Wealtheon portfolio or any individual client. You cannot invest directly in an index, and index returns do not reflect fees, costs or taxes. Clients hold different investments depending on their circumstances and advice, and individual outcomes will differ.
Where this publication describes what commentators or investment managers expect, those are their views and not forecasts by Wealtheon. They may prove incorrect.
Sources
[1] Morningstar, Markets Observer, Q3 2026 edition, data as at 30 June 2026. Quarterly returns for US and emerging market equities; the growth-versus-value spread; sector returns including technology and energy; commodity and oil price falls; government bond yields at 30 June 2026; June central bank decisions (ECB, Bank of Japan, US Federal Reserve); first-half returns by country.
[2] VanEck, ViewPoint — “Optimism reigns”, July 2026. RBA decision and tone; cash rate 4.35% and the possibility of 4.6%; household savings and spending; the May 2026 Federal Budget and its housing effects; Australian consumer discretionary and listed property; data-centre capital expenditure; credit spreads and private credit; Australian bank valuations.
[3] JPMorgan Asset Management, Guide to the Markets — Australia, Q3 2026 edition, data as at 30 June 2026. Australian inflation (headline 4.0%, trimmed mean 3.6% for the year to May 2026; imported 2.5%, domestic 4.7%); unemployment 4.4% in May 2026; wage growth 3.2% in the March quarter. Underlying data attributed by the publisher to the Australian Bureau of Statistics, the Reserve Bank of Australia and FactSet.
Index returns are as reported by each publisher, in the base currency stated in the source, and are not adjusted to Australian dollars unless specified. Where sources differ — unemployment is 4.4% in [3] and 4.5% in [2] — we have used the figure attributed to the ABS.
We have not quoted an Australian share market return for the quarter, because the figures available to us for that specific measure could not be verified to a satisfactory standard. Australian shares rose over the quarter; we have not put a number on it.
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