Quarterly newsletter, September 2025

The easing cycle slows

The first quarter of FY26 has seen Australian and global markets navigate persistent uncertainty, with resilience a defining feature. The ASX 200 reached new highs in August, briefly breaching 9,000 before settling around 8,950 in early October. Over the past year, the ASX 200 has recorded 16 all-time highs, capping an 11% return and reflecting strong sector rotation—resources have begun to outperform banks, reversing last year’s trend. Investor sentiment is cautiously optimistic, supported by expectations of further rate cuts and robust corporate earnings in select pockets, though valuations remain elevated and earnings growth at the index level is flat to negative.

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The Reserve Bank of Australia left the cash rate unchanged at 3.60% in September and October, following three cuts earlier in the year. While inflation has eased significantly from its 2022 peak, the pace of decline has slowed, and recent data suggest underlying inflation may be stickier than anticipated. The RBA remains cautious, signalling that further rate cuts will be data-dependent, with the next decision likely hinging on the Q3 CPI figures due later this month. Most economists now expect the easing cycle to slow, with the next cut potentially delayed until 2026.

The Australian dollar has stabilised around 65–66 US cents in October, after reaching a seven-month high in September. The currency’s strength reflects broad US dollar weakness, ongoing rate cut expectations, and Australia’s relative insulation from severe US tariff actions. Gold has been a clear beneficiary of the US dollar’s recent weakness, rallying to record highs above US$4,000 per ounce as its appeal as a safe-haven asset and inflation hedge has intensified.

Global equity markets have rallied, led by US technology stocks and a resurgence in small caps. All U.S. indices recorded record highs in early October, with dozens of new all-time highs set in the past year as strong corporate earnings, AI optimism, and expectations of further rate cuts from the Federal Reserve drove momentum. Oil prices remain volatile, with Brent crude trading around $65–71 per barrel in October; most analysts expect prices to trend lower into 2026.

The easy gains on the various local and global indices are now behind us. While Australian equities remain supported by strong fundamentals and resilient household demand, elevated valuations, sticky inflation, and unpredictable global trade policy warrant a cautious approach. We continue to monitor developments closely and will adjust portfolio strategies as conditions evolve.

Returns for the first Quarter of FY2026

  • All Ordinaries: 9135, up 362 points, or 4.1%
  • S&P/ASX 200 A-REIT: 1,863.20, up 103 points or 4.0%
  • 90 Day Bank Bills: 3.59%, down 0.02%
  • AUD vs US Dollar: 65.79c, up 0.33c or 0.51%
  • UK FTSE 100: 9350 points, up 582 points or 6.64%
  • Dow Jones Industrial Avg: 46,397 points, up 2,320 points or 5.27%

Guardian Investments Pty Ltd ABN 18 608 506 261 is a Corporate Authorised Representative of Guardian Associates Pty Ltd AFSL 238281. This page reproduces commentary published in September 2025 and is general advice only. It has not been tailored to your objectives, financial situation or needs, and the figures were current at the time of writing. Past performance is not a reliable guide to future returns. Seek personal financial advice before acting on it.