Investor intelligence – 9 June 2026

Global equities rose 4.9% in hedged terms and 4.6% in unhedged terms, following gains of 8.6% and 5.3%, respectively, in the prior month. The consistency of these returns highlights an ongoing improvement in investor sentiment.

Risk appetite last month remained supported by signs of easing geopolitical tensions. The ceasefire between the United States and Iran, agreed in early April, continued to hold through May, albeit with some fragility. Markets increasingly priced in a lower probability of a prolonged disruption to global energy supply.

This view is prone to setbacks and was put to the test on the weekend after a flare-up in violence. Iran and Israel have now agreed to ease strikes against each other after US President Trump appealed for de-escalation.

Macroeconomic data also pointed to some resilience in the world economy, despite the energy shock. A key driver has been the continued surge in investment linked to AI, which is supporting both business activity and broader demand. This was evident in the corporate reporting season, which delivered strong earnings outcomes across major regions. In the United States, earnings grew by around 30% year on year, driven by the technology sector.

Growth stocks performed well, reflecting the persistent strength of technology and AI related sectors, where earnings momentum and capital expenditure remain elevated. Investors are increasingly willing to pay a premium for companies with clear exposure to structural growth themes, particularly those linked to AI infrastructure and digitalisation.

We are also approaching a wave of truly large IPOs, most notably SpaceX and Anthropic. SpaceX remains loss yet is expected to list at an implied valuation of 90-110 times revenue. SpaceX has stated that its total addressable market is US$28.5 trillion, which is huge. It is roughly comparable to the size of the US economy.

Emerging markets were the standout performers in May, rising 9.7%. This strength was largely driven by North Asia, particularly Korea and Taiwan, where equity markets are deeply embedded in the global semiconductor and AI supply chains.

Developed markets also delivered a solid gain with Japan a notable outperformer. Japanese equities were supported not only by global risk sentiment and technology exposure, but also by improving domestic fundamentals. First quarter GDP surprised to the upside, expanding at an annualised rate of 1.8%, led by stronger consumption and exports. It was higher than markets anticipated and has reinforced confidence that Japan’s recovery is becoming more durable, providing an additional pillar of support for equity valuations. However, it has also added to expectations that the Bank of Japan will raise rates at its next meeting on 16 June.

Overall, the combination of easing geopolitical risks, resilient economic data and strong earnings momentum underpinned another positive month for global equities. However, the increasing concentration of returns in AI-related sectors and regions highlights a growing divergence within global markets. Markets are also digesting the rising probability of a rate hike from the US central bank before the end of this year.

This divergence reflects the index’s structural composition with a heavier reliance on cyclical sectors such as financials and materials and more limited exposure to structural growth themes around AI.

The modest performance also reflected the domestic policy backdrop. The Reserve Bank (RBA) raised the cash rate for a third consecutive meeting on 5 May, taking the cash rate to 4.35%. The Governor’s subsequent commentary suggested a near-term pause, which led financial markets to push out expectations for further tightening to later in the year.

Market volatility was evident through the month with the ASX 300 reaching a high on 7 May before declining to a low on 20 May following the Federal Budget. Announced on 12 May, the Federal Budget introduced significant tax changes across negative gearing, capital gains tax and trusts, contributing to investor uncertainty.

Sector performance was mixed. Five sectors recorded gains, led by materials, while six sectors contracted, highlighting the uneven nature of returns across the market.

Healthcare remained a key drag on the index with CSL continuing to underperform and declining by around 46% over the first five months of the year. It issued a downgrade at the start of last month, which spurred on a further selldown.

Resource companies continue to perform strongly and are increasingly acting as second‑order beneficiaries of the AI investment cycle. Large language models require immense computational capacity, delivered through data centres and the build‑out of these ’AI factories’ which is materially lifting demand for key inputs such as steel, copper and aluminium. The infrastructure required to support this ecosystem is both capital intensive and resource heavy, reinforcing demand across the broader commodities basket.

Australian fixed interest returned 1.6% for the month, while global fixed income delivered a more modest gain of 0.7%. Performance reflected a divergence in underlying macroeconomic conditions with Australian yields declining while US yields moved higher in May, underpinned by data that surprised on the strong side for both inflation and payrolls. Bond yields in most other developed economies fell.

This divergence highlights the impact of the recent shift in domestic monetary policy. The RBA’s move back into a tightening phase has contributed to a slowing in economic activity, reinforcing expectations that economic growth will soften further.

The Australian 2-year bond yield declined by 25 basis points in May to end the month at 4.52% and the Australian 10-year yield by 23 basis points to close May at 4.83%. They reached their lowest levels since mid May and late March, respectively. The move lower in yields followed the April inflation release, which provided the first meaningful read on the pass through from higher oil prices. While March data captured the initial energy shock, April’s data suggested only a modest second‑round effect with underlying inflation rising by 0.3% for the month and the annual rate edging up from 3.3% to 3.4%.

Labour market data reinforced this softer outlook. The unemployment rate increased to 4.5%, its highest level in 4½ years, pointing to a labour market that is easing more quickly than policymakers had anticipated.

In contrast, US Treasury yields continued to move higher with the 2‑year and 10‑year yields rising by 13 and 7 basis points, respectively, reflecting more persistent inflation pressures and a more resilient growth backdrop. In early June, US Treasury yields continued to rise after US payrolls data for May showed ongoing resilience in the labour market. US non-farm payrolls rose by 172k in May – double market expectations – and the unemployment rate stayed unchanged at 4.3%.

Currency markets in May were similarly shaped by shifting risk sentiment and interest-rate expectations. The US dollar strengthened modestly over the month, reflecting its safe‑haven role during periods of geopolitical uncertainty. The Australian dollar experienced significant intra‑month volatility, despite ending May little changed against the US dollar. The AUD/USD exchange rate appreciated to a near 4-year high of 0.7278 in early May before retracing 0.7080 in mid May. Against other major currencies, however, the Australian dollar was generally firmer, supported by improved risk appetite and relative strength in commodity markets.

Early June has opened up with extra volatility due to tensions reigniting in the Middle East and unexpectedly firm US payrolls data that has led markets to fully price in a rate hike from the US Federal Reserve by year’s end. The AUD/USD sold off from around 0.7180 to hit a near-2-month low of 0.7038 on 5 June and remains under pressure today.

Currency traders are also eyeing USD/JPY carefully after it breached the 160.00 level on 5 June. This is a level that has often led Japanese authorities to intervene in the foreign-exchange market to prevent further yen depreciation. USD/JPY has moved back under 160.00 in trade today, but only modestly so.

Global listed property fell 0.8% over the month, reflecting the sector’s ongoing sensitivity to interest-rate dynamics and discount rates. Diverging bond market trends across regions shaped outcomes. US Treasury yields moved higher last month while government bond yields in most other developed markets eased, creating a more mixed backdrop for valuation‑sensitive assets.

Listed infrastructure also delivered negative returns, declining 1.7% over the month. While the asset class continues to benefit from stable earnings profiles, inflation-linked revenues and long-dated contracted cash flows, it was not immune to broader market movements. The pullback follows a period of relative outperformance and highlights that, despite its more defensive characteristics, infrastructure remains exposed to shifts in global interest-rate expectations.

US expectations for monetary policy have shifted. At the start of of May, swap markets assigned only a small probability to a rate cut by year end. By the end of May, there was close to a 70% probability of a rate hike and today there is now a rate hike fully priced by December 2026. US non‑farm payrolls for both April and May have surprised on the strong side and core inflation rose to a six-month high of 2.8% in the year to April.

Markets had been pricing a lower probability of a renewed escalation between the United States and Iran, helped by ongoing negotiations and a retreat in oil prices from recent highs. But the conflict is not resolved and renewed tensions over the weekend highlight just how fragile the ceasefire is. The pace at which transit through the Strait of Hormuz returns to normal is critical, as it will determine how contained the economic fallout from the energy shock is. Until then, energy markets are likely to remain sensitive to setbacks and financial markets will continue to react to shifts in the geopolitical narrative.

The global economy has so far shown resilience, supported by strong corporate earnings and continued investment linked to AI. But performance across share markets has become increasingly concentrated with much of the earnings strength concentrated in technology and semiconductor sectors.

If geopolitical conditions continue to improve, some of the themes that dominated earlier in the year may come back into sharper focus. These include the case for greater diversification beyond the US, particularly toward Europe and emerging markets, and the view that the US dollar’s safe-haven role may be less powerful from here.

Equities have remained notably optimistic throughout the Middle East shock and may already reflect a reasonably favourable outcome. Bonds, by contrast, may have more room to benefit if easing energy pressures translate into softer inflation expectations.

Bond markets in other major economies are also increasingly pricing in a more inflationary outlook. In the US, bond yields have risen in early June, as fresh payrolls data suggest the Federal Reserve may need to begin hiking before the end of the year.

In Australia, the outlook has shifted more clearly toward slower growth. The RBA has tightened policy materially, taking the cash rate back to 4.35%, but the hurdle for further tightening has risen. We think the risk of one more rate hike remains, but softer labour market conditions and only modest pass through from higher oil prices into inflation make the case less compelling than it was a month ago. GDP data for the March quarter, released last week, reinforced the view that the economy is weakening, although strong investment in data centres has masked the extent of the slowdown in underlying activity. Taken together, these developments point to a more fragile domestic growth environment with inflation still above target.

More broadly, the environment continues to point to a more fragmented and structurally inflation‑prone global economy with supply chains increasingly shaped by strategic considerations and investment in energy, infrastructure and data capacity remaining elevated.

Fiscal policy is becoming a more important part of the domestic macroeconomic outlook. In Australia, the recent Federal Budget introduced a significant set of tax changes, particularly around housing and investment, while government spending remains elevated relative to history. This is occurring at a time when inflation remains above target. Fiscal-policy settings are still adding to demand, albeit more mildly, even as monetary policy remains restrictive. For a detailed assessment of the Budget measures and their implications, see the analysis available at William Buck Federal Budget 2026 insights.

The impact of the Federal Budget on housing remains widely debated. We have downgraded our forecasts for dwelling price growth, with prices now expected to rise by 2.5% this year and 2.0% next year. We also see a risk that price pressures shift into the rental market. Auction clearance rates had already begun to soften ahead of the Budget and have remained under pressure since, pointing to further moderation in price growth. While mid‑tier capital cities such as Perth, Brisbane and Adelaide have shown greater resilience than Sydney and Melbourne, we expect this divergence to narrow over time.

Overseas, a wave of very large IPOs tied to AI‑related business models is starting to emerge. These companies exhibit strong top line growth, but profitability remains elusive and the shift toward public markets reflects the limits of private funding and internally generated cashflows. While investor enthusiasm for the AI trade remains strong, equity issuance of this magnitude can, at times, signal that positioning is becoming more stretched.

In this global and domestic environment, returns are likely to remain episodic and sensitive to shifts in macroeconomic conditions. Portfolio construction should continue to emphasise resilience, diversification and selectivity, while maintaining exposure to structural growth themes where the longer‑term opportunity remains compelling.