Your quarterly market commentary

At a glance

Key takeaways from the June 2026 quarter:

• Global share markets delivered strong returns despite concerns about conflict, inflation and interest rates.
• Technology and artificial intelligence (AI)-related companies led gains.
• Emerging markets, particularly in Asia, outperformed many developed markets.
• Bond returns were more modest as investors reassessed the outlook for interest rates.
• The Reserve Bank of New Zealand (RBNZ) left the Official Cash Rate (OCR) unchanged at 2.25%.

A quarter that challenged investors

If you only followed the headlines during the June quarter, you might have expected markets to struggle.

Conflict in the Middle East, concerns about higher oil prices and ongoing uncertainty around inflation all created periods of market volatility. Investors were also watching closely to see whether central banks would cut interest rates, or in some cases need to keep them higher for longer.

Despite these challenges, financial markets finished the quarter strongly.

As concerns about the conflict eased and oil prices fell, investors shifted their attention back to the fundamentals: economic growth, company profits and the rapid expansion of AI-related investment. Global share markets rebounded strongly, reminding investors that markets can recover quickly, even when uncertainty remains.

Investor takeaway

Periods of uncertainty are a normal part of investing. This quarter was another reminder that markets often recover before the headlines improve.

What's driving markets? The AI investment boom

One of the biggest themes supporting markets this year has been ongoing investment in artificial intelligence.

Technology companies continue to invest heavily in data centres, cloud computing and the infrastructure needed to support AI. This spending has benefited not only large US technology companies, but also businesses across Asia that supply the semiconductors, hardware and components needed to power these technologies.

This helped drive strong returns from technology shares during the quarter, with AI-related companies among the market's strongest performers.

Emerging markets had a strong quarter

While US technology companies attracted much of the attention, some of the strongest returns came from emerging markets.

Countries such as Taiwan and South Korea benefited from their important role in the global technology supply chain. Many companies in these markets manufacture the semiconductors and hardware required for AI development.

This highlights a point that is often overlooked: emerging markets can offer exposure to powerful global themes, not just domestic economic growth or commodity markets.

Why bond markets were less exciting

While shares performed strongly, bond markets delivered more modest returns.

Bond investors spent much of the quarter balancing two competing forces:

• Falling oil prices helped ease some inflation concerns.
• Economic growth remained relatively resilient, reducing pressure on central banks to lower interest rates quickly.

As a result, expectations for future interest rates continued to change, leading to periods of volatility in bond markets.

What happened in New Zealand?

In New Zealand, the RBNZ kept the OCR at 2.25% at its May meeting.

The central bank noted that higher oil prices and global uncertainty could keep inflation elevated in the near term, while also weighing on economic growth.

By late June, however, the outlook had improved as oil prices eased and concerns about the Middle East conflict reduced.

Why this matters for households

The OCR influences:

• Mortgage rates
• Term deposit rates
• Business borrowing costs
• Consumer spending and broader economic activity

This means changes in interest-rate expectations can have a direct impact on household budgets as well as investment markets.

The June quarter highlighted the importance of staying focused on long-term goals.

Investors who reacted to short-term market volatility may have missed some of the strongest periods of market recovery. While uncertainty can be uncomfortable, markets often move ahead of events rather than waiting for complete clarity.

The quarter also reinforced the value of diversification.

Technology and AI-related investments were standout performers, but market leadership can change quickly. Holding a diversified portfolio across different regions and asset classes can help spread risk and reduce reliance on any single theme or sector.

Bonds may not have delivered the same returns as shares this quarter, but they continue to play an important role in many portfolios by providing diversification and helping manage risk.

Looking ahead

As we move into the second half of 2026, three key themes are likely to remain in focus:

1. Inflation

Investors will be watching to see whether inflation continues to ease as energy prices stabilise.

2. Company earnings

Strong company profits have helped support markets. The key question is whether earnings growth can continue, particularly in technology and AI-related sectors.

3. Interest rates

Central banks are trying to balance inflation and economic growth. Future interest-rate decisions will remain an important driver of market performance.

The June quarter was a reminder that uncertainty and opportunity often go hand in hand.

While markets delivered strong returns, periods of volatility are likely to continue. For long-term investors, the focus should remain on maintaining a diversified portfolio that aligns with their goals, investment timeframe and comfort with risk.