Investment market performance Q2 2026

Investment markets shifted through the second quarter of 2026 (1 April–30 June), presenting both headwinds and opportunities for investors. In this article, we look at how markets performed during this period, as well as some of the key economic developments that drove the movements.  
 

Australia

Share market: The Solactive Australia 200 Index, which represents Australia’s top 200 companies, was up 4.1% in AUD terms over the quarter, though this was below global stock markets.¹

In part, this lagging indices was due to the Australian market not having much exposure to the AI boom. 

Interest rates: Australia’s inflation rate rose to 4.1% in Q1 (up from 3.6% in Q4 2025)², which was above the Reserve Bank of Australia’s (RBA) target range of 2-3%.³ Core inflation – which excludes volatile items like food and energy – increased from 3.4% to 3.5%.⁴

Following a rate hike in February, the RBA further increased the cash rate in March to 4.1%.⁵ It increased again in May – to 4.35% – with the rate kept on hold in June.⁶

These decisions reflected persistent inflationary pressures earlier in the year, increased uncertainty linked to the Middle East conflicts, and higher fuel prices.  

Housing market: As measured by Cotality's Home Value Index (HVI), the Australian housing market decreased 1.2% in Q2 2026 (following a 1.9% increase in Q1).⁷ This was due to several factors:  

• higher interest rates
• stretched affordability
• a shift to a more cautious sentiment among buyers, and  
• tax changes that have reduced investor demand. 

Australian dollar: The AUD continued to recover during the first half of Q1. Against elevated interest rate expectations and strong commodity prices, it peaked in mid-May at 72.6 cents to the USD.⁸  

Following a collapse in oil prices and reduced expectations of further hikes, the USD strengthened in June. By the end of Q2, the rate fell to 69.2 US cents – just 0.2 above its starting rate of 69 US cents.⁹ 
 

New Zealand

Share market: The Solactive New Zealand Top 50 Index saw a 5.6% increase in NZD terms over the quarter, outperforming Australia.¹⁰

The New Zealand market has a large portion of dividend-paying stocks, and these performed well. This is largely due to expectations that the Reserve Bank of New Zealand (RBNZ) wouldn't need to hike rates as much as anticipated during the remainder of 2026. It also benefited from investor optimism, as the New Zealand economy showed signs of improving. 

Housing market: Nationally, the QV House Price Index showed a 0.3% increase in house prices from March to May.¹¹ 

House prices are currently 0.2% lower than the same time in 2025, with the average national property value now NZ$912,190.¹²

Interest rates: After cutting the official cash rate by 0.75% during Q4 2025 to 2.25%, the RBNZ kept rates on hold throughout the first half of 2026.11 On 8 July 2026, it increased the rate to 2.5%.¹³  

At the end of Q1 2026, the New Zealand economy had seen an annual increase of 1.6%.¹⁴ The inflation rate in Q1 2026 remained stubbornly high at 3.1%, with markets anticipating two more interest rate hikes in 2026.¹⁵ 
 

United States

Share market: In USD terms, US stocks were up around 15% over the quarter, marking a strong recovery from a weak Q1. AI infrastructure spending accelerated, with AI-related companies seeing surging stock prices. Combined with strong corporate earnings and easing geopolitical tensions, this led to one of the strongest quarters for US stocks in over five years. 

Interest rates: During Q2 2026, the Federal Reserve kept interest rates unchanged at a target of 3.50%-3.75%.¹⁶ This is in line with the Reserve’s goals of achieving maximum employment and price stability.  

The Personal Consumption Expenditures (PCE) inflation rate stood 4.1% at the end of May 2026¹⁷, while core inflation was at 2.9%.¹⁸ 
 

A review of Q2 2026 

After negative returns in Q1, financial markets saw positive returns in Q2. Concerns around war and inflation receded, and investors returned to focusing on AI-driven earnings growth and the infrastructure behind it, leading to a very strong quarter for global stocks.  

Bond returns had a much more muted quarter. Stronger economic growth led to expectations of higher interest rates, dragging down returns.

We continue to monitor the major drivers of markets and their impact on Resolution Life portfolios. While investing always involves uncertainty, the current environment is particularly difficult to predict. For well-performing portfolios, the best form of defence is diversification, with exposure to a range of asset classes that can help during volatile times.   

Sources:  

¹ Solactive Australia 200 Index Performance 
^{2, 3, 4, 5, 6} Reserve Bank of Australia Monetary Policy
⁷ Australian House Prices – Cotality Home Value Index  
^{8, 9} FactSet
¹⁰ Solactive New Zealand Top 50 Index Performance
^{11, 12} NZ house Prices – QV House Price Index
^{13, 14, 15} Reserve Bank of New Zealand Official Cash Rate
¹⁶ Bloomberg Federal Reserve, Bureau of Economic Analysis (BEA), U.S. Bureau of Labor Statistics
¹⁷ US Bureau of Economic Analysis (BEA), Personal Consumption Expenditures Price Index.
¹⁸ Bureau of Labour Statistics Data.