Quarterly Market Report – Quarter Ending 30 June 2026
General
| July 23, 2026
General Market Update
After what was a difficult start to the year, the June quarter brought a very different experience. The ceasefire in the Middle East in early April, followed by the partial reopening of the Strait of Hormuz shortly after, changed the outlook rapidly. Oil prices fell, inflation expectations moderated, and equity markets recovered strongly.
The S&P 500, which had been down around 7% for the year at the start of April, erased those losses within weeks and went on to reach new all-time highs. By the end of the quarter, the index was up around 9% for the year.
Market Recovery
The recovery was broad. It was not confined to the technology stocks that had driven markets in prior years. Smaller companies, international equities, and value-oriented strategies all participated, and in some cases led. This broadening of market leadership continued a theme that had been emerging since the start of the year, interrupted briefly by March’s sell-off but not extinguished by it. By June, the rotation was well underway again, with smaller and mid-sized companies outperforming large-caps during the month.
Rate Increases
In Australia, the RBA raised the cash rate one more time in May, to 4.35%, citing the second-round effects of higher fuel prices on broader goods and services inflation. The vote was 8 to 1 in favour. The Board then held rates steady in June, signalling that monetary policy was now restrictive enough to give it space to pause and monitor how conditions evolve. Headline inflation sat at 3.8% and unemployment at 4.1% at the end of the quarter. Australian equities advanced modestly, with the ASX 200 returning around 4%.
For investors, the quarter was a useful reminder that market recoveries can happen just as quickly as the sell-offs that precede them. And that being positioned for the recovery matters at least as much as surviving the downturn.
Outlook
Key considerations moving into the future include:
The Ceasefire Environment
The ceasefire in the Middle East and the partial reopening of the Strait of Hormuz removed the most acute source of market stress from Q1. Oil prices have retreated from their peaks, and the immediate inflation shock has begun to moderate. However, the situation remains fluid, and a resumption of hostilities would reintroduce the same pressures that destabilised markets earlier in the year.
Interest Rates: On Hold For Now
The RBA held rates at 4.35% in June after three consecutive increases. The accompanying commentary suggested the Board sees monetary policy as sufficiently restrictive to bring inflation back toward target over time. Whether further hikes are required will depend on how inflation, the labour market, and global conditions evolve.
Equity Markets: Recovery and Valuations
The speed of the Q2 recovery has been remarkable, but it means equity markets are no longer pricing in the same level of uncertainty that prevailed in March. Valuations in some segments have returned to elevated levels. This remains an important watch going forward
