Global market update June

As 2026 ticks along, investors are well conditioned to the fact that markets are continually balancing ecocougaing economic data and developments against well-documented and concerning global risk. Inflation, interest rates and geopolitical tensions remain key themes; there are also signs that global growth remains more resilient than many expected.

As the financial year looms this month, we take a look at data from around the world and break down the good, the challenges, and what investors need to know.

The Reserve Bank of Australia increased interest rates by a further 0.25%, taking the cash rate to 4.35%. While the rate rise itself was expected, the more important development was the tone of the RBA’s communication. Governor Michele Bullock indicated the Board now has the flexibility to pause further increases, and major Australian banks have since forecast that rates are likely to remain unchanged for the rest of 2026. For borrowers and investors, this suggests we may have reached the peak of the current interest rate cycle, providing greater certainty for households and rate-sensitive sectors of the market.

Inflation remains a global challenge, but there was encouraging news from the United States. The Federal Reserve’s preferred inflation measure, Core Personal Consumption Expenditures (Core PCE), rose by less than expected in April. While overall inflation remains elevated, this softer reading suggests underlying inflation pressures may not be accelerating further. This is positive for investment markets because it reduces the likelihood of additional interest rate increases and supports both bond markets and growth-oriented companies.

China kept its benchmark lending rates unchanged for an eleventh consecutive month. Importantly, policymakers appear comfortable with current economic conditions and are preserving stimulus measures for future use if required. Economic growth has remained resilient, while concerns around deflation have eased. Stability in China remains important given its role as a major driver of global commodity demand and economic activity.

The temporary tariff reduction between the United States and China has now been extended through November 2026. Each extension reduces the risk of renewed trade disruptions and increases businesses’ confidence. A more stable trade environment supports global growth and reduces uncertainty across financial markets.

Investor confidence continues to improve, highlighted by the reopening of the global initial public offering (IPO) market. SpaceX has filed for what could become the largest public listing in history, while OpenAI has also signalled plans to list publicly. Strong IPO activity is typically a sign of healthy investor sentiment and improving market conditions.

The conflict in the Strait of Hormuz remains one of the most significant risks to the global economy. The region is a critical energy transportation route, and disruptions have removed substantial oil supply from global markets. Oil prices have surged, increasing costs for businesses and consumers worldwide. Higher energy prices also create inflationary pressure, making it more difficult for central banks to reduce interest rates.

While many investors are focused on global developments, inflation remains a domestic concern. The RBA now expects inflation to remain above its target range until at least 2027. Australian households continue to face rising housing costs, higher electricity bills and elevated living expenses.

Moody’s downgraded the United States’ sovereign credit rating in May, making it the final major ratings agency to remove the United States’ top-tier AAA status. While the practical impact is limited, the downgrade highlights ongoing concerns about rising government debt and fiscal sustainability. Bond markets reacted by pushing long-term borrowing costs higher, creating additional volatility across financial markets. The passage of the “One Big Beautiful Bill Act” is expected to add significantly to US government deficits over the coming decade. Combined with the recent credit rating downgrade, concerns around long-term government borrowing remain a key issue for investors and could continue to influence bond market behaviour.

The European economy remains caught between weak growth and elevated inflation. The European Central Bank held rates steady, but economic growth remains subdued while inflation remains above target. This creates a difficult environment for policymakers and increases the risk of a prolonged period of slow growth.

The conflict in the Strait of Hormuz remains the key risk to markets, with higher oil prices adding inflationary pressure and increasing costs across global supply chains. As a result, we continue to favour businesses with strong structural growth drivers that are less exposed to commodity price volatility and supply disruptions.

Despite these challenges, the global economy entered this period from a position of strength. Healthy corporate earnings, supportive government spending and the ongoing benefits of previous interest rate cuts continue to provide a foundation for economic resilience. Central banks face a difficult balancing act between controlling inflation and supporting growth, which is likely to keep interest rates higher for longer. While this may create periods of market volatility, ongoing support from policymakers and improving liquidity conditions should help cushion the impact.

Looking ahead, we remain positive on long-term growth opportunities, particularly in areas such as artificial intelligence, advanced manufacturing, digital infrastructure and energy investment. While markets may remain volatile in the short term, we believe resilient earnings and structural growth trends continue to support a constructive outlook for investors through the remainder of 2026.