Global markets faced a more challenging backdrop in September as higher interest rates and bond yields weighed on investor sentiment. Inflation remained elevated, oil prices rose amid renewed Middle East tensions and the Australian dollar weakened, supporting unhedged overseas returns for Australian investors.
While the global economic expansion remains intact, higher borrowing costs, uneven consumer conditions and demanding valuations are creating a wider gap between financially stronger businesses and more vulnerable companies.
Australian shares declined during September as higher interest rates placed pressure on several areas of the market. Technology companies were among the weakest as rising bond yields reduced the appeal of higher-growth investments. Materials also fell alongside lower iron ore prices, while financials and consumer discretionary companies were affected by higher borrowing costs and pressure on households and businesses.
Healthcare was a notable bright spot, supported by better-than-expected company results. Energy also held up relatively well as oil prices rose.
International shares eased in local currency terms, although a weaker Australian dollar improved returns for Australian investors holding unhedged overseas investments. The United States held up better than most major developed markets, supported by continued strength in artificial intelligence-related technology companies. Europe, the United Kingdom and Japan were weaker.
Emerging markets also softened, although technology-focused markets including Taiwan and South Korea performed better.
Australian and global fixed interest markets declined as government bond yields rose following further interest rate increases and ongoing inflation concerns. Rising yields weighed on bond prices as investors adjusted to the prospect of interest rates remaining higher for longer.
Australian corporate bonds held up better than global corporate bonds during the month. Higher yields are also improving the income available from fixed interest investments and may provide greater portfolio protection if economic growth slows.
| As at 30 September 2026 | 1 Month (%) | 12 Months (%) |
|---|---|---|
| Australian Shares | -2.4Â | 2.7 |
| Australian small-cap shares | -2.3Â | -6.7 |
| International shares (hedged) | -0.7Â | 17.5 |
| International shares | 1.9 | 11.2 |
| International small-cap shares | -1.2 | 10.5 |
| Australian fixed interest | -0.9 | -0.4 |
| International fixed interest (hedged) | -1.7 | -0.6 |
| Cash - bank bills | 0.4 | 4.1 |
Source: FactSet / Evidentia.
Government bond yields have risen sharply as large fiscal deficits, increased borrowing and persistent inflation keep interest rates higher. The chart highlights the significant increase in Australian and global bond yields since the lows recorded in 2020 and 2021. .
Continued economic growth and structural investment provide reasons for optimism. However, higher bond yields, uneven consumer conditions and demanding valuations leave less room for disappointment.
In this environment, diversification, earnings quality and valuation discipline remain important. A well-diversified portfolio can help manage risk while maintaining exposure to long-term investment opportunities.
If you would like to discuss your investment strategy or portfolio, get in touch with your local Boyce office.
If you'd like to discuss your investment strategy or portfolio, get in touch with your local Boyce office.
