Your Market Update - February 2026

Your Market Update - Summary

Market Key Points 

• Markets started the year positively, despite volatility. Global markets advanced over January, even as geopolitical risks, renewed tariff threats, bond market volatility and a reassessment of AI‑related valuations created a noisy backdrop. Investor focus remained on resilient economic conditions and early signs of improving earnings, although volatility picked up again in early February.
• Australian shares were supported by commodities, but rate pressures remain. Australian equities rose over January, driven by strength in materials and energy. Persistent inflation has reinforced a less supportive interest‑rate environment, with the Reserve Bank of Australia lifting rates in February and markets anticipating further increases into 2026, weighing on interest‑sensitive sectors
• Global equity performance broadened. International shares delivered strong gains, led by Europe and parts of Asia. Japan benefited from improving domestic momentum and a more active policy environment, while emerging markets were supported by a stronger month for China. A stronger Australian dollar reduced returns for local investors.
• Fixed interest returns were modest. Higher bond yields weighed on government bonds, while corporate bonds performed relatively better as credit spreads tightened, reflecting confidence in corporate balance sheets despite the challenging interest‑rate backdrop.
• Australia’s economic momentum is improving, but earnings recovery remains narrow. GDP growth is close to trend, supported by population growth, resilient services activity and strengthening household spending and business investment. Corporate earnings are showing early signs of recovery, although gains remain concentrated in resource‑exposed sectors.

Market Developments

Australian Markets

Australia’s economy is gaining momentum, moving beyond its earlier period of weak growth into a more sustainable expansion. GDP growth is now close to trend at around 2.1%, supported by population growth, easing pressure on household incomes and resilient services activity. Leading indicators, including improving business confidence and Purchasing Managers’ Index readings above 50, point to steadier momentum ahead, even as inflation remains a challenge for policymakers.

A notable shift has been the return of the private sector as the main driver of growth. Household spending has remained resilient, supported by stable employment and improved cash flows, while business investment has strengthened. Planned investment is approaching $70 billion, led by renewable energy, electricity infrastructure, data centres and defence. This is important, as non‑mining investment typically has a stronger flow‑through to domestic activity, wages and earnings over time.  

Fixed Interest and Credit Markets

Fixed interest markets delivered modest returns overall. Rising bond yields weighed on government bond performance, while corporate bonds fared better as credit spreads tightened. This reflected investor confidence in corporate earnings resilience and balance‑sheet strength, despite a less supportive interest‑rate backdrop.