What a difference a quarter can make. Watch our quick [3-minute video] for a simple overview of the market rebound and the key events that shaped the June quarter.
After a challenging end to March, global markets bounced back strongly over the June quarter. April began with uncertainty, but as geopolitical tensions eased, energy prices retreated and company earnings remained strong, confidence returned. Renewed enthusiasm around artificial intelligence also helped drive global shares higher, resulting in one of the strongest quarters for markets in recent years.
April
A cautious start turns a corner
April began with much of the uncertainty from the previous quarter still hanging over markets. The conflict involving Iran had pushed energy prices sharply higher and raised fresh concerns about inflation and global growth.
But the mood began to improve in April as steps towards de-escalation between the United States and Iran helped ease concerns around global energy supplies. The agreement was later formalised in June.
Oil prices began to retreat from their earlier highs, giving markets some breathing room. At the same time, company earnings proved stronger than expected, particularly in the US, helping investors look beyond the uncertainty and setting the stage for a broader recovery.
May
Markets find their momentum
By May, the recovery was gathering pace. Strong company earnings and renewed enthusiasm around artificial intelligence helped drive US markets higher, with technology and AI-related companies leading the way.
Importantly, the rally also began spreading beyond the biggest technology companies. Emerging markets performed strongly, particularly Korea and Taiwan, supported by growing demand for semiconductors and memory chips. European markets also benefited as falling energy prices improved sentiment.
Closer to home, Australian shares continued to make gains, although they did not rise as strongly as international markets. Australia has fewer companies directly exposed to the AI boom, but performance was still relatively broad across sectors, including technology, materials, healthcare and consumer stocks.
The RBA also raised the cash rate by 0.25% to 4.35% in May as inflation remained above its target range. Higher borrowing costs continued to put pressure on households, with spending and the housing market showing signs of slowing.
June
A strong finish, but some risks remain
Markets continued their strong run into June as easing geopolitical tensions helped confidence return. The US-Iran peace agreement was formalised during the month, helping reduce uncertainty and contributing to a further fall in oil prices.
International shares finished the quarter with double-digit gains, led by technology and companies linked to AI. Australian shares also moved higher, although gains were more modest than those seen overseas.
Bonds also delivered modest positive returns over the quarter. Australian bonds benefited as local yields moved lower, while global bonds also gained. Credit markets remained relatively calm, suggesting investors were still confident in the financial strength of companies despite lingering uncertainty.
At home, the RBA left the cash rate unchanged in June following May's increase. While the pause raised hopes that further increases may not be needed, inflation remained a concern and the RBA continued to face a difficult balancing act between bringing prices under control and an economy already feeling the impact of higher rates.
The June quarter showed just how quickly markets can change direction. Strong company earnings, renewed enthusiasm around AI and easing geopolitical tensions helped markets rebound, but some risks remain.
Looking ahead, inflation and interest rates will continue to be important, alongside developments in the Middle East. While the broader economic backdrop remains relatively supportive, some markets and sectors are looking expensive after their strong run.
For investors, the outlook remains constructive, but there are still risks to watch. Staying diversified, focusing on quality and keeping a long-term view can help put short-term market movements into perspective.