Every so often, a quarter reminds us that markets rarely move in a straight line. After the strong rebound we saw in June, the September quarter brought a change in direction. Global tensions returned, energy prices climbed and inflation moved back into focus. Markets still managed to make some progress, but beneath the surface, conditions became much more uneven.
Prefer the highlights? Watch our latest quarterly market update video for a quick overview of the key events that shaped the September quarter.
July
A more unsettled start
July began with some of the optimism from the previous quarter still carrying through, but conditions quickly became more unsettled.
Tensions between the United States and Iran resurfaced, raising fresh concerns about global energy supplies. At the same time, Asian technology and semiconductor shares - which had been some of the strongest performers earlier in the year - came under pressure as investors questioned whether the significant spending on AI would deliver returns quickly enough.
Despite the volatility, the broader global economy continued to hold up relatively well. Company earnings remained strong, particularly in the US, helping provide some support to markets as investors weighed the changing outlook.
August
Markets push higher, but pressures build
By August, major US share markets had pushed to record highs, supported by another strong company earnings season and continued investment in artificial intelligence.
But the picture wasn't as strong everywhere. Over the quarter as a whole, smaller US companies struggled under the weight of higher borrowing costs, while emerging markets finished broadly flat after a strong first half of the year.
Geopolitical tensions also continued to build. The 60-day negotiating window between the US and Iran expired on 17 August without an agreement, adding to concerns about global energy supplies.
Closer to home, the RBA held the cash rate at 4.35%. Inflation for August rose to 4.0% as higher fuel prices added to cost pressures. The unemployment rate also increased, highlighting the balancing act facing the RBA.
September
Inflation and interest rates take centre stage
September brought another shift in sentiment as energy prices surged and concerns about inflation returned.
Oil prices climbed sharply as conflict in the Middle East intensified, putting renewed pressure on household and business costs around the world. Higher energy prices also added to expectations that interest rates could remain higher for longer.
Central banks responded. The US Federal Reserve increased rates for the first time since 2023, while other major central banks also tightened policy.
In Australia, the RBA raised the cash rate by 0.25 percentage points to 4.60% at its September meeting as inflation remained above its target range. Australian shares finished the quarter broadly flat in price terms. Healthcare performed well, while energy and mining companies benefited from higher commodity prices. Technology, property and other interest-rate-sensitive areas came under more pressure.
Bond markets also had a difficult finish to the quarter as yields rose sharply around the world. It was another reminder that when inflation is driving uncertainty, both shares and bonds can experience pressure at the same time.
Outlook
The September quarter showed how quickly the market story can change. Strong company earnings and continued investment in AI provided support, but rising energy prices, persistent inflation and renewed geopolitical tensions made conditions increasingly uneven.
Looking ahead, inflation and interest rates will remain important, alongside developments in the Middle East. The global economy has continued to grow, supported by strong company earnings and ongoing business investment, providing some reasons for optimism despite the uncertainty.
For investors, 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.