Global and Australian share markets continued to move higher in August, supported by company earnings, technology sector growth and investor confidence. At the same time, inflation concerns, geopolitical tensions and expectations of further interest rate increases remained firmly in focus.
While markets demonstrated resilience throughout the month, investors continue to balance strong company performance against a backdrop of slower economic growth, higher interest rates and elevated market valuations.
Australian shares gained ground in August, led by healthcare, materials, utilities and technology companies. Smaller companies outperformed larger businesses, while financial and consumer discretionary sectors lagged.
The August reporting season delivered stronger-than-expected results, with earnings among Australia's largest listed companies growing by around 11% during the 2026 financial year. Much of this growth came from the resources sector, helped by higher commodity prices and improved margins.
However, challenges remain. Inflation continues to sit above the Reserve Bank's target range, and markets are increasingly pricing in another interest rate rise. Further increases could place additional pressure on household budgets, borrowing costs, housing activity and company profits.
International shares delivered positive returns, particularly in Japan and the United States, where technology-related sectors remained a key driver of growth.
Ongoing investment in artificial intelligence continues to create opportunities across several industries, including semiconductors, data centres, power infrastructure, critical minerals and cloud services.
A stronger Australian dollar meant that currency-hedged international investments outperformed unhedged positions during the month.
Bond markets produced mixed results. Australian bond yields moved higher as inflation data strengthened expectations of another Reserve Bank rate increase. Rising yields led to modest declines in Australian government and high-quality corporate bond prices.
International bonds were more stable, benefiting from steadier interest rate expectations overseas. Higher rates have also improved income opportunities for bond investors compared with recent years.
| As at 31 August 2026 | 1 Month (%) | 12 Months (%) |
|---|---|---|
| Australian Shares | 1.5 | 4.4 |
| Australian small-cap shares | 5.2 | -1.2 |
| International shares (hedged) | 2.4 | 22.6 |
| International shares | 0.6 | 11.7 |
| International small-cap shares | 0.7 | 12.5 |
| Australian fixed interest | -0.2 | 0.6 |
| International fixed interest (hedged) | 0.2 | 1.8 |
| Cash - bank bills | 0.4 | 4.0 |
Source: FactSet / Evidentia.
Several themes continue to influence investment markets:
The chart below highlights the differing performance of major sectors within the Australian market over the past year. Materials stocks have significantly outperformed the broader ASX200, while financial companies have delivered more modest gains.
The divergence reinforces the importance of maintaining diversification across sectors and asset classes rather than relying on a small group of market leaders.
Periods of market strength can create opportunities, but elevated valuations and ongoing economic uncertainty mean investors should remain focused on their long-term objectives. Diversification, disciplined portfolio management and a clear understanding of risk remain important in changing market conditions.
As always, maintaining a diversified portfolio and focusing on long-term investment objectives remains the most effective approach to managing uncertainty and identifying opportunities as market conditions evolve.
If you'd like to discuss your investment strategy or portfolio, get in touch with your local Boyce office.
