Market Insights: September Quarter 2026

One of the more important developments during the September quarter was a change in expectations around interest rates.

At the beginning of the quarter, many investors expected central banks to remain on hold for some time. By quarter end, markets had begun reassessing that view as inflation remained more persistent than expected and economic growth continued to hold up, particularly in the United States and across Europe.

Higher energy prices contributed to this shift and, alongside rising bond yields, pushed up borrowing costs in many markets. This made the effects of inflation more noticeable for households and businesses, but energy prices were not the only factor.

The continued investment in artificial intelligence infrastructure, including data centres and related technology, is supporting economic activity. However, it is also increasing demand for energy, materials, workers and investment, adding to inflationary pressures that have proven more persistent than many investors expected.

As a result, bond markets spent much of the quarter reassessing where interest rates may be heading and whether inflation will take longer to come down.

• US sharemarket (S&P 500): up around 2.0%.
• Australian sharemarket (S&P/ASX 200): up around 0.1%.
• Global shares (MSCI World Index): up around 1.3%
• Emerging market shares (MSCI Emerging Markets Index): down around 0.9%
• Australian bonds (Bloomberg AusBond Composite 0+ Yr Index): down around 1.5%
• Global bonds (Bloomberg Global Aggregate Index, hedged to AUD): down around 2.4% 

A notable feature of the quarter was that different parts of financial markets appeared to be signalling different things.

Equity markets remained reasonably resilient, supported by healthy company earnings and economic growth. Bond markets, however, were more cautious, focusing on inflation, government borrowing and the possibility that interest rates may remain higher for longer.

When markets are not aligned, the overall picture becomes harder to interpret. This reinforces the importance of looking beyond short-term market movements and maintaining a diversified, long-term approach.

The quarter also highlighted some important differences between Australia and the United States.

In the United States, economic growth remained relatively strong and expectations for company profits generally improved. In Australia, growth remained more subdued and expectations for company profits weakened across many sectors.

One notable exception has been resources. Continued investment in artificial intelligence infrastructure and data centres has supported demand for commodities and helped parts of the Australian market perform more strongly than others. This helps explain why investment outcomes can vary considerably across regions and sectors.

The key point for investors is that market headlines only tell part of the story.

Inflation, interest rates and government debt will continue to influence markets, but disciplined portfolio construction and diversification are more important to long-term outcomes than reacting to individual market headlines. They can help investors navigate periods when different markets are sending different signals.

Markets are also beginning to ask more questions about when significant investment in artificial intelligence will begin generating meaningful returns. While enthusiasm around AI remains strong, investors are becoming more focused on how that investment translates into future earnings and long-term growth.

This does not mean investors should react to every headline. Rather, it reinforces the importance of understanding how a portfolio is constructed and spreading investments across a range of asset classes, regions and investment styles.

Markets rarely move in a straight line, and different investments respond differently to changing economic conditions.

This is why diversification remains one of the most effective ways to manage uncertainty. Rather than reacting to individual headlines, a diversified portfolio helps investors remain focused on their longer-term objectives.

At CFS, diversification across asset classes, regions and investment styles remains central to how portfolios are positioned as we navigate a range of potential market outcomes.

Looking ahead, economic growth remains relatively resilient, particularly in the United States. However, inflation, government debt levels and the outlook for interest rates are all likely to remain important influences on markets in the months ahead.

While uncertainty is likely to persist, remaining diversified and focused on long-term objectives remains as important as ever.