Investment markets had a solid start to the 2025/26 financial year. Ongoing uncertainty later contributed to a cautious feeling, which stabilised markets towards the end of the first half.
Global markets rose over the first few months of the financial year in anticipation of interest rate cuts by the US Federal Reserve, which occurred in September, October and December. Growth then steadied as technology stocks, which were a primary driver of US market growth, slowed slightly. Emerging markets also gained in the first half of the financial year as they benefited from central banks lowering interest rates to support domestic growth.
Locally Australian shares started the financial year strong increasing from July through to September. November then saw Australian shares fall, as it was looking more unlikely the RBA would further reduce interest rates after lowering them by 0.25% in August. The RBA board indicated an increase in inflation and economic uncertainty as key reasons for holding rates at 3.60% for the remainder of 2025.
Looking ahead
There are a range of factors that could lead to market volatility and a more cautious approach from investors over the remainder of the financial year.
Of particular note are the upcoming US mid term elections and the ongoing geopolitical risks across the US, Ukraine, Iran and Greenland. There are also concerns that AI shares, which continue to grow, are in a bubble that could burst. Inflation also continues to be a factor impacting investment markets.
BUSSQ investments
We have recently completed an extensive program of work interrogating our investment beliefs and philosophy, our overall investment portfolio construction and our investment option menu for members. As a result of this, in December 2025 we made material changes, removing underperforming investment managers and increasing our exposure to passive investment managers in the short term. Over the coming months, we will continue to review our investment portfolio with the aim of ensuring it is fit for purpose and delivers on our investment objectives for members during this next phase of the investment cycle.
To see our latest investment performance visit our investment performance page.
