Investment markets in review – Q2 2026
Pitcher Partners Investment Services (Melbourne) | The information in this article is current as at July 7, 2026.
The financial year ended with share markets around the world in positive territory, however it was not a year without challenges. A major shutdown of the US government in occurred in November, in addition to war in the Middle East and other geopolitical tensions. Throughout the period however, AI remained the dominant theme and the single most influential force shaping markets. The ASX 200 returned a modest 6.1% compared with 22.3% for the S&P 500, 22.5% for the MSCI Europe and 40.6% for the MSCI Asia Ex Japan. The relatively few Australian-listed technology stocks and final quarter weakness in energy stocks holding our local market back.
The June quarter rounded out the year well. Confidence among investors grew that a deal with Iran was close and that the Strait of Hormuz, a key shipping route for oil and other commodities, would reopen. Near term inflationary pressures were judged to be temporary which sent the price of oil lower and caused equity markets to rally. The ASX 200 returned 4.0% for the quarter while the S&P 500 gained 15.2% driven by an earnings season Deutsche Bank described as one of the best in 20 years, with three-quarters of reporting companies beating earnings estimates. AI remains the primary force in the IT sector and Moody’s expects the six largest hyperscalers to spend approximately US$700 billion in AI infrastructure by the end of 2026. Investors though have began to question whether this level of spending would translate into future profits and that uncertainty prompted a shift away from the Magnificent Seven technology stocks, into firms further up the supply chain. Semiconductor firms Micron, Sandisk and Intel each tripled in value, well ahead of the broader market.
Demand for electronics and semiconductors benefited South Korea and Taiwan which helped the Asia ex-Japan region to rise 27.7%. Emerging markets returned 24.1%, lifted by the same Asian technology names but tempered by South American and Middle Eastern markets with greater exposure to energy price volatility. Elsewhere, Japan and Europe both advanced 14.4%, while the UK returned a more subdued 4.7%.
Domestically, the RBA raised the cash rate by 25bp in May but held in June to let previous hikes work their way through the economy to counter rising inflationary pressures. Most major banks expect rates to remain at these current levels for the remainder of 2026 before falling in 2027.
US rates remained unchanged over the quarter as Kevin Warsh took over as Fed Chair. Markets had priced in two rate cuts, however stronger economic data and the sharp rise in energy prices have led to predictions of a hike as soon as September. Globally, markets struggled to evaluate the impact of volatile energy prices on inflation and growth leaving bond markets without a clear direction. After a near year-long pause, a widely anticipated hike by the ECB was comfortably absorbed while UK and Eurozone government bonds made above index gains. US treasuries were largely flat, Japanese bonds fell into negative territory after their central bank raised rates, and emerging market debt was supported by an improving inflation outlook. European high yield debt outperformed the US counterparts amid tightening credit spreads.
Commodities were broadly lower with the exception of copper which was supported by strong demand for new data centres. Oil was volatile over the quarter. Early on the conflict in the Middle East pushed Brent crude oil futures above $125 a barrel but as tensions eased the wartime premium had almost entirely gone by the end of June. This marked the worst quarter for crude since the initial pandemic shock.
In Australia, the Federal Budget was handed down in May setting an ambitious tax and superannuation agenda. Changes to be phased in include scrapping the 50% capital gains discount, applying a minimum tax on discretionary trusts and the removal of negative gearing on established properties. The first tranche of legislation passed in June with a second tranche to follow.
The Australian dollar finished the quarter relatively flat at $0.69 USD.
| Financial Markets at 30 June 2026 | |||
| Indices | Current Level | 3 Months | 1 Year |
| ASX 200 | 8,778.7 | 3.5% | 2.8% |
| ASX 200 (Acc) | 120,530.6 | 4.0% | 6.1% |
| US S&P 500 | 7,499.4 | 14.9% | 20.9% |
| Japan Nikkei | 70,062.3 | 37.2% | 73.0% |
| UK FTSE 100 | 10,497.1 | 3.2% | 19.8% |
| MSCI World (AUD) | 25,190.5 | 12.5% | 14.8% |
| German Dax | 24,995.8 | 10.2% | 4.5% |
| French CAC | 8,404.0 | 7.5% | 9.6% |
| HK Hang Seng | 22,881.0 | -7.7% | -4.9% |
| Shanghai Comp | 4,094.4 | 5.2% | 18.9% |
| ASX 200 Prop (Acc) | 80,081.9 | 13.7% | -2.2% |
| Global Prop | 3,269.0 | 8.8% | 14.3% |
| Australia 2Y Bond Yield | 4.42 | -24 bp | +122 bp |
| Australia 10Y Bond Yield | 4.72 | -25 bp | +56 bp |
| US 2Y Bond Yield | 4.17 | +38 bp | +45 bp |
| US 10Y Bond Yield | 4.47 | +15 bp | +24 bp |
| Commodities | Current Level | 3 Months | 1 Year |
| Gold (oz) | 4,008.0 | -14.1% | 21.3% |
| Oil (Barrel) | 69.5 | -31.4% | 6.7% |
| Iron Ore (Tonne) | 93.4 | -8.5% | 5.4% |
| Aluminium | 3,085.5 | -11.0% | 33.5% |
| Copper | 13,375.0 | 8.4% | 25.0% |
| Lead | 1,875.0 | -1.5% | -6.9% |
| CRB Index | 511.6 | -5.4% | 19.6% |
| Currencies | Current Level | 3 Months | 1 Year |
| AUD/USD | 0.6919 | 0.3% | 5.2% |
| AUD/EUR | 0.6058 | 1.5% | 8.5% |
| AUD/GBP | 0.5216 | 0.0% | 8.9% |
| AUD/JPY | 112.46 | 2.7% | 18.7% |
| AUD/CNY | 4.695 | -1.4% | -0.4% |
| ASX Indices | Current Level | 3 Months | 1 Year |
| S&P/ASX Small Ordinaries Index | 3,424.91 | 3.0% | 5.5% |
| S&P/ASX 200 Communication | 1,623.19 | -4.1% | -12.4% |
| S&P/ASX 200 Consumer Discretionary | 3,995.63 | 18.7% | -3.6% |
| S&P/ASX 200 Consumer Staples | 13,341.80 | 6.4% | 10.1% |
| S&P/ASX 200 Energy | 9,487.56 | -16.5% | 9.4% |
| S&P/ASX 200 Financials | 9,349.21 | 0.6% | -1.9% |
| S&P/ASX 200 Financial excluding A-REIT | 10,427.50 | 0.6% | -1.9% |
| S&P/ASX 200 Healthcare | 26,043.72 | -6.1% | -37.4% |
| S&P/ASX 200 Industrials | 8,459.30 | 7.5% | 1.7% |
| S&P/ASX 200 Information Technology | 1,821.16 | 17.0% | -37.2% |
| S&P/ASX 200 Materials | 23,387.68 | 7.4% | 47.5% |
| S&P/ASX 200 A-REIT | 1,695.68 | 12.5% | -5.3% |
| S&P/ASX 200 Utilities | 9,679.76 | -7.6% | 5.9% |
| World Indices | Current Level | 3 Months | 1 Year |
| MSCI World Value Index | 4,752.13 | 8.6% | 18.6% |
| MSCI World Growth Index | 7,532.50 | 18.6% | 20.8% |
| MSCI World Small Cap Index | 767.65 | 14.6% | 28.2% |
| MSCI World Large Cap Index | 3,102.04 | 13.9% | 20.7% |
| MSCI World Communication Services | 165.65 | 6.9% | 14.9% |
| MSCI World Consumer Discretionary | 485.82 | 8.5% | 5.1% |
| MSCI World Consumer Staples | 311.12 | 1.1% | 3.0% |
| MSCI World Energy Sector | 312.86 | -13.9% | 24.9% |
| MSCI World Financials | 237.24 | 11.2% | 12.5% |
| MSCI World Health Care | 403.32 | 6.4% | 14.4% |
| MSCI World Industrials | 570.68 | 11.7% | 20.9% |
| MSCI World Information Technology | 1,181.22 | 33.5% | 37.8% |
| MSCI World Materials Sector | 429.87 | 1.0% | 22.9% |
| MSCI World Utilities Sector | 214.37 | -0.7% | 14.6% |
Source: Morningstar, IRESS
