Your quarterly market commentary
Q3 2026
Key takeaways from the September 2026 quarter
• The global economy performed better than expected supported by consumer spending, strong labour markets, and continued business investment.
• Global share markets had a positive quarter with technology and artificial intelligence (AI) companies among the strongest performers, particularly in the United States.
• Bonds had a more difficult quarter as concerns about inflation increased expectations that interest rates could stay higher for longer, putting pressure on bonds.
• New Zealand’s economy continued to grow, but at a slower pace. Inflation remained high and the OCR increased, contributing to weaker returns from New Zealand shares compared with many global share markets.
The global economy held up better than expected
Consumer spending, labour markets, and business investment helped support growth across major developed economies. The United States was an important contributor, supported by their continued investment in technology, data centres, and AI infrastructure.
Why does a stronger economy matter to investors?
In a growing economy, people and businesses are generally spending and investing more. This can give companies more opportunities to increase their sales and earnings (net profit after expenses), which can support investment returns over time.
A positive quarter for share markets
Global share markets went up overall, although some areas performed better than others. Technology and AI companies were among the strongest performers, particularly in the United States, while higher oil prices supported energy companies. European and Japanese markets also made gains, while emerging markets had mixed but generally positive results.
Higher interest rates weighed on government bonds
Bond markets had a more difficult quarter. Rising energy prices, continued wage growth, and a strong economy raised concerns that inflation could take longer to slow. This meant central banks may need to keep interest rates higher for longer. When interest rates are higher, newly issued bonds can offer better returns, making existing bonds less attractive and causing their value to fall. This weighed on bond returns during the quarter, particularly for longer-term government bonds.
Why do inflation and interest rates affect bonds?
Central banks can raise interest rates to help slow inflation. Higher interest rates make borrowing more expensive, which can reduce spending and help slow the rate at which prices are rising.
Bond prices and interest rates typically move in opposite directions. When interest rates rise, newly issued bonds can offer higher returns, making existing bonds less attractive and causing their market value to fall. When interest rates fall, the opposite can happen.
Corporate bonds held up better than government bonds, helped by healthy company balance sheets and earnings. While higher yields put pressure on bond prices during the quarter, they also increased the income available from many bond markets. This could support returns from bonds over the longer term.
A mixed quarter for other investments
Commodity markets (investments in raw materials) were influenced by higher oil prices, as supply concerns and tensions in the Middle East increased. Higher energy prices also added to inflation concerns and how this could affect interest rates.
Listed property and infrastructure investments were more challenged, as rising bond yields put pressure on valuations, particularly for income-oriented investments (investments that aim to provide regular income).
What happened in New Zealand?
New Zealand’s economy continued to grow, but at a slower pace. Households remained under pressure from higher living and borrowing costs, while inflation remained high, partly due to rising fuel prices. In response, the Reserve Bank increased the Official Cash Rate (OCR) twice during the quarter, taking it to 2.75%.
Higher interest rates created a more challenging environment for investments. New Zealand shares rose slightly over the quarter but lagged many global markets, while bond prices also came under pressure. However, tighter interest rates also increased the income available from newly issued bonds, which could benefit bond investors in the longer term.
What does all this mean for investors?
This quarter showed that markets can continue to make progress, even when the outlook remains uncertain. Strong company earnings helped support share markets, despite ongoing concerns about inflation, interest rates, and global tensions.
It also showed that different investments don’t always move in the same direction. Shares delivered positive returns overall, while higher interest rates put pressure on bonds.
For investors, it’s a reminder to look beyond short-term market movements. Staying diversified and focused on your long-term goals can help you navigate periods when some investments are performing better than others.
AMP exists to help Kiwis achieve a better financial future. We’ve been doing this since 1854 - so we understand, better than anyone, that good things take time. We take a long-term approach to investing - prioritising sustainable growth and stability for our customers. We partner with Blackrock (a global investment leader) to provide simple, accessible & sustainable index tracking managed funds. Our funds aim for market returns, while keeping investment costs down – meaning higher-than-average returns for our members.
