Episode #23 | June 2026: From the Three bears to Goldilocks

Anyway, two market performances over the month of May.

Looking around the globe, most equity markets were positive.

Some were really positive.

The NASDAQ, for example, in the US performed very strongly, up almost 10%.

And we had a pretty strong return as well in the Japanese market, rising almost 12%.

Now, some of the underlying reasons there indeed for both of those equity market performances was the fact that growth outcomes are coming in a bit stronger than expected and indeed a good deal stronger than had been feared just a couple of months ago.

So that was broadly the story globally.

Here in Australia, the equity market was also up, but way less robust than most other global markets.

Only really 1% or fractionally more for the month of May.

And look, probably weighing on the market performance here is not only the RBA's rate hike in May, but also expectations of further rate hikes to come.

The only good thing we can really say is that as at the end of the month, As at the end of May, the extent of further rate cuts has been somewhat downgraded compared with expectations at the end of April.

And that really leads us to interest rates.

What did they do over the month? Right around the globe, they rose during the first half of the month, but generally then eased a little bit lower towards the end of the month.

And that's mainly as the oil price started to slip away a little at the end of the month.

Oil actually finished the month down quite a deal.

And with that, a big impact on interest rates.

But interestingly enough, even with that second half decline in yields, the Japanese and the US market both ended the month with higher yields than the end of April.

But here in Australia, we saw quite a significant rally in yields and they slipped more than any other market actually during the course of May.

Measures of market volatility, which we often look at, so the VIX, which is reasonably well known, that's a measure of expected volatility for equities, that continued to ease a little bit.

And the MOVE index, which is the similar measure for bonds, that similarly eased.

So these two indices of expected volatility had risen incredibly in March, of course, as the Middle East war broke out, but the last couple of months they've eased.

And that really just leaves us with the Aussie dollar.

Look, very little changed at around 72 cents or slightly below as at the end of the month.

Now, of course, what happened in the Middle East and what Trump said, what oil prices did, these continued to be the most significant determinant of what was going on in markets.

But I think it's fair to say that macro data just took a very slightly more important role during the course of the month.