The major themes dominating financial markets right now are:
- The Middle East war: Associated price increases for crude oil, natural gas, and fertiliser are a growing threat to global economic activity.
- National self-sufficiency: Countries are prioritising national security by focusing on local supply chains for energy, minerals, and technology.
- The “old-economy” comeback: As nations race to build data centres and secure independent energy sources, traditional industrial and energy firms are coming back into focus.
- The AI execution phase: Investors are now rewarding companies that successfully use AI to cut costs or grow sales, rather than just the “chip makers”.
- Structural inflation: Inflationary pressures are returning, prompting many central banks to increase interest rates and pushing bond yields higher.
Returns of major asset classes to 30 April 2026
| Asset class | CYTD 30 Apr 26 | 3 months | 6 months | 1 year | Ann. 3 year | Ann. 5 year | Ann. 10 year |
|---|---|---|---|---|---|---|---|
| Global shares in USD | 6.8 | 3.7 | 7.9 | 31.7 | 20.5 | 11.3 | 12.9 |
| Global shares in AUD | 0.1 | 1.0 | -1.7 | 17.2 | 17.2 | 12.9 | 13.6 |
| US shares in AUD | -2.0 | 1.5 | -3.5 | 16.6 | 18.3 | 14.8 | 16.0 |
| Emerging markets in AUD | 6.3 | 2.6 | 5.0 | 31.3 | 17.9 | 8.1 | 10.3 |
| Australian shares | 0.5 | 1.2 | -0.9 | 10.1 | 9.7 | 8.4 | 9.3 |
| Australian small companies | -7.9 | -10.4 | -8.0 | 15.3 | 8.7 | 3.7 | 7.3 |
| Australian listed property | -9.5 | -7.0 | -11.3 | -0.2 | 9.2 | 6.2 | 5.9 |
| Australian bonds | -0.3 | -0.5 | -1.8 | -0.1 | 2.0 | 0.1 | 1.8 |
| Global bonds (hedged AUD) | 0.1 | -0.1 | 0.0 | 2.4 | 3.1 | -0.1 | 1.6 |
Global markets
Share markets have produced unusually positive returns over the past three years. Global bonds have also been positive. However, the strengthening Australian Dollar significantly reduced returns in AUD.
Despite an overwhelming news cycle in 2026, global shares have performed well. US share prices reached new historic highs, supported by corporate profit margins hitting 15-year peaks. Since February, returns have been led by a resurgence in technology companies, following a brief period of scepticism about AI sustainability. Meanwhile, emerging markets remained strong, driven by Asian technology in Korea and Taiwan, as well as Latin American energy and commodities.
Australian markets
In Australia, the headline results mask a sharp divide between sectors. Overall, the market was subdued. Nevertheless, Energy and Materials surged 34% and 17% respectively year-to-date, with one-year returns of 58% and 46%. In contrast, Australian small companies and listed property were hit hard by rising interest rates. Small companies are currently correcting after a strong 25% return in 2025. Healthcare continues to slump.
In the fixed-income space, Australian bond returns fell below cash due to rising yields. Investment Grade Credit, however, continued to offer attractive yields.
Outlook for economies and markets
The outlook for the rest of 2026 points to strong global earnings. That said, several headwinds persist, including high sovereign debt levels, energy supply disruptions, and elevated valuations in the US and Australian markets. The US and emerging markets are the most positive. By contrast, Europe and the UK are slowing and remain highly vulnerable should the energy crisis continue.
Domestically, the Middle East war has made the Australian economy more fragile following resilient growth in 2025. Business investment is mostly technology-related, and confidence among businesses and consumers has fallen sharply. Furthermore, the spike in inflation pushed interest rates to 4.35% in May 2026, adding to cost-of-living pressures.
Overall, we remain positive on growth assets and quality credit. Even so, we emphasise active management to identify relative value in specific sectors and sub-asset classes.
Conclusion: Our preferred approach
- Continue to be diversified by asset classes.
- Remain flexible and incorporate active management.
- Review currency hedging in the portfolio.
- Bonds and high-quality credit for income and stability.
- Seek inflation protection with exposure to listed global property and infrastructure.
- Regular rebalancing to maintain target allocations.
The purpose of this website is to provide general information only and the contents of this website do not purport to provide personal financial advice. JourneyNest strongly recommends that investors consult a financial adviser prior to making any investment decision. The contents of this website does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions. The information is selective and may not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this website is given in good faith and is believed to be accurate at the time of compilation.