TWD Monthly Market Update – July 2026
Broader Market Moves1
Macro Commentary
Financial markets delivered mixed returns during June as investors moved past heightened geopolitical tensions in the Middle East and refocused on the underlying economic and earnings backdrop. The S&P/ASX 200 rose 0.67% on a Total Return basis during the month, while the S&P 500 declined 0.95% in US dollar terms following an exceptionally strong prior quarter.
Within Australia, sector performance was highly uneven. Healthcare was the strongest-performing sector, rising 13.26%, while Consumer Staples and Consumer Discretionary also delivered double-digit gains of 12.99% and 12.18%, respectively. The strength in consumer and defensive sectors coincided with easing energy prices and improving investor confidence that the geopolitical shock would not materially derail the economic outlook. In contrast, Energy and Materials underperformed, falling 8.89% and 6.73%, respectively, as commodity prices retraced and concerns surrounding global supply disruptions eased.
Domestic economic developments remained a key focus during the month. Inflation showed further signs of moderation, with the monthly CPI indicator slowing to 4.0% year-on-year in May from 4.2% previously. However, underlying inflation remained more persistent, with the trimmed mean measure increasing to 3.6%. Against this backdrop, the Reserve Bank of Australia left the cash rate unchanged at 4.35% at its June meeting, noting that inflation remains above target and reiterating its data-dependent approach to future policy decisions. Labour market conditions also remained resilient despite broader signs of economic moderation, with employment increasing by 40,300 positions and the unemployment rate declining to 4.4%.
International markets were mixed during June, with periods of heightened volatility giving way to a more constructive backdrop by month-end. Early in the month, investor sentiment was challenged by escalating tensions in the Middle East and renewed concerns surrounding global energy supplies. However, as progress towards a peace agreement between the United States and Iran became increasingly apparent, markets began to treat the episode as a contained shock rather than a lasting drag on global growth. This shift in sentiment allowed investors to refocus on the artificial intelligence investment cycle and broader earnings outlook.
Continued investment associated with artificial intelligence infrastructure remained an important support for global equities during June. A key highlight was the quarterly result from Micron Technology, a leading supplier of high-bandwidth memory chips used in AI workloads, which delivered stronger-than-expected guidance and reinforced expectations that spending on data centres, chips and related infrastructure will continue to rise materially over coming years. The result reaffirmed expectations that spending on data centres, chips and related infrastructure will continue to rise materially over coming years, helping to ease concerns that elevated valuations across parts of the technology sector are unsupported by underlying earnings growth and reinforcing confidence in the durability of the AI capital expenditure thematic.
US economic data remained mixed but not recessionary. Non-farm payrolls increased by 57,000 in June, while the unemployment rate edged down to 4.2%. However, payroll growth for April and May was revised lower by a combined 74,000 positions, providing further evidence that hiring momentum is moderating. Job openings remained broadly stable at 7.6 million, suggesting labour demand is continuing to cool gradually rather than deteriorating sharply. The Atlanta Federal Reserve’s GDPNow model estimated second-quarter economic growth at approximately 1.2% as at 26 June, pointing to a still-expanding US economy. At the same time inflation remained an important constraint on monetary policy, limiting the scope for near-term easing and reinforcing expectations that interest rates may need to remain restrictive for longer should price pressures persist.
Commodity markets experienced significant volatility throughout June. Brent crude oil briefly rallied amid concerns that disruptions to shipping routes and energy infrastructure in the Middle East could materially tighten global supply. However, these fears eased considerably as the month progressed, with Brent crude finishing June around US$71 per barrel, well below the highs reached earlier in the month as concerns over a prolonged disruption to global energy supplies receded. The sharp retracement in oil prices helped alleviate concerns regarding energy-driven inflation and supported broader market sentiment.
Gold prices also experienced large swings during the month. Safe-haven demand initially supported prices during periods of heightened geopolitical uncertainty before improving investor sentiment and easing concerns surrounding global energy markets saw prices retreat. Gold finished June around US$4,065 per ounce, remaining elevated by historical standards despite the pullback from recent highs.
Looking ahead, markets appear to be moving on from the geopolitical shock that dominated headlines during June. While geopolitical risks remain, investors are increasingly treating the Middle East episode as a contained shock rather than a catalyst for a prolonged disruption to global growth and energy markets. Attention is shifting back towards the outlook for inflation, interest rates and the continued investment cycle associated with artificial intelligence infrastructure. Against this backdrop, maintaining diversified portfolio exposures and focusing on high-quality businesses remains important as markets continue to navigate an environment characterised by moderating growth, elevated valuations and persistent policy and geopolitical uncertainty.
1ASX 200 refers to SPDR S&P ASX 200 Fund (STW), S&P 500 refers to iShares S&P 500 (AUD Hedged) ETF, MSCI World refers to Vanguard MSCI Index International Shares (Hedged) ETF, NASDAQ 100 refers Nasdaq 100 Currency Hedged ETF, AU Comp refers to the Vanguard Australian Fixed Interest Index ETF, Global Agg refers to Vanguard Global Aggregate Bond Index (Hedged) ETF, Gold (USD) refers to the LSEG Gold Spot Price (USD)
DISCLAIMER:
The contents of this publication are only intended to provide a summary and general overview of matters of interest in the financial markets and in the economy and are distributed in order to promote broad discussion. The publication does not constitute investment or financial product advice, it does not constitute an offer or invitation to purchase a financial product or financial service, nor does it of itself create a client-financial adviser relationship. To the extent that any part of the contents of this publication may be said to constitute “general advice” we warn you not to act on any matter referred to in this publication without first seeking qualified financial product advice appropriate to your particular circumstances, needs and objectives before acting or relying on any content in this publication. TWD Licensee Services Pty Ltd (ABN 88 605 064 480 – AFSL 475964) makes no warranties or representations about the accuracy or completeness of the content of this publication, and excludes, to the maximum extent permissible by law, any liability which may arise as a result of the use of the content of this publication.