Quarterly newsletter, September 2026

Higher rates, tighter conditions, steadier income

The September quarter brought a tightening on every front. The Reserve Bank lifted the cash rate to 4.60%, its fourth increase this year and the highest since late 2011, as headline inflation rose to 4.0%. Global bond yields reached multi-decade highs and Brent crude returned above US$100 a barrel. Legislated changes to capital gains tax and negative gearing have also made the tax environment less favourable for investors. Households are feeling the strain: ANZ–Roy Morgan consumer confidence ended September below the lows of the early-1990s recession, national dwelling values have fallen for six consecutive months.

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The economy is under pressure, and market prices are softening in response. Most asset classes finished the quarter modestly lower, with the exception of commodities.

Our outlook is flat for the remainder of the year into next year. With inflation still above target, further rate rises remain likely. We expect conditions to tighten further before consumer demand, and markets weaken enough for the Reserve Bank to begin easing. Cooler US inflation data in August offered an early sign that price pressures can moderate, but that turning point may take some time, and volatility is likely to persist until it arrives.

On the positive side, the underlying investment picture is displaying more resilience than the headline numbers suggest. Despite the stress across the economy, corporate balance sheets of larger companies remain sound, most companies are still profitable, and dividends and interest payments continue to be met. Higher rates are also a source of income. The floating-rate interest-bearing assets we invest in reset in line with the cash rate. So, the same rate increases that weigh on asset prices also lift the income these investments generate.

Periods like this are not new. Markets have moved through tightening cycles before, most recently in 2022–23 and have recovered once inflation eased and rates began to fall. Until then, quality assets, reliable income and adequate liquidity remain the right foundations.

Returns for the 2027 Financial Year (3 months)

  • All Ordinaries: 8,969 points, down 17 points or 0.19%
  • S&P/ASX 200 A-REIT: 1,544 points, down 152 points or 8.95%
  • 90 Day Bank Bills: 4.77%, up 0.31 percentage points. AUD vs US Dollar: 69.77c, up 1.08c or 1.57%
  • UK FTSE 100: 10,606 points, up 109 points or 1.04%
  • S&P 500: 7,652 points, up 152 points or 2.03%

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 2026 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.