Market Commentary - September 2026

When bad news meets good markets

There was no shortage of headlines competing for attention in the third quarter of 2026.

Among them were continuing conflict in the Middle East, higher energy prices, renewed inflation concerns and interest rate increases from several central banks. Yet, at the same time, businesses kept investing, the global economy continued to expand and most major share markets finished the quarter higher.

That might seem contradictory. But for members of the Evidential KiwiSaver Scheme, it offered another useful reminder that the economy, investment markets and the news headlines may be related, but they are not the same thing.

Growth despite the gloom

The global economy entered the quarter with plenty to worry about. Geopolitical tensions remained elevated, energy and transport costs increased, and inflation again became a concern. Despite this, the widely anticipated global downturn failed to arrive.

Economic growth slowed in some places, but businesses continued operating, consumers continued spending, and corporate profits remained relatively resilient.

Artificial intelligence also remained an important source of investment. Significant sums continue to be spent not only on AI software, but also on semiconductors, data centres, electricity generation, telecommunications and construction. While this investment is supporting economic activity today, which companies and industries ultimately benefit most remains far less certain – another reason for KiwiSaver investors to remain diversified and focused on the long term.

Inflation returns

Not everything was moving in a favourable direction, however, with inflationary pressures resurfacing.

Higher energy costs eventually found their way into transport, manufacturing and household expenses. As those pressures increased, central banks again had to consider whether interest rates were high enough to keep inflation under control.

For investors, that produced an interesting quarter. Higher interest rates cause bonds to fall in price (with corresponding higher yields) and can also put downward pressure on share prices. Yet global developed market shares rose in aggregate and New Zealand shares also recorded a positive quarter, while bonds had a more difficult time.

Someone who had correctly anticipated higher oil prices, rising geopolitical tensions and further interest rate increases might quite reasonably have expected share markets to fall.

They didn't.

That's an important lesson. Predicting the news is difficult. Predicting the news and how markets will respond to it is harder again.

At home

Here in New Zealand, some indicators pointed to continued economic recovery, although conditions remained mixed.

Economic growth was modest, inflation moved higher and unemployment remained elevated. Rising fuel prices added to inflation pressures, prompting the Reserve Bank to increase the Official Cash Rate twice during the quarter. The housing market also remained relatively subdued, while higher agricultural prices, increased horticultural volumes and a lower New Zealand dollar provided some support to exporters.

What does this mean for you? What happens here in New Zealand matters, particularly for the local investments in your portfolio. But KiwiSaver investing is much broader than the New Zealand economy. A globally diversified portfolio spreads investments across different markets and opportunities, helping investors look beyond short term developments at home and stay focused on long term outcomes.

Built for different conditions

A diversified portfolio is a little like a well balanced team. You wouldn't build a team entirely around a single type of player or position, because different situations call for different strengths. Investments work in much the same way, with different assets playing different roles as conditions change.

During the third quarter, shares generally rose while bonds struggled. In another quarter, those positions could easily reverse. However, nobody knows in advance when that will happen.

That's why the objective isn't to build a portfolio that outperforms every quarter. It's to hold a diversified portfolio capable of navigating many different quarters, without having to predict what happens next.

For Evidential KiwiSaver Scheme investors, that means continuing to focus on the things we can control: having an investment strategy suited to your goals and time horizon, remaining diversified, and giving that strategy the time it needs to work.

 

 

 

The information contained in this article is intended to be of a general nature. It does not take into account the objectives, financial situation or needs of any particular person, and does not constitute financial advice. Consilium NZ Limited is the issuer of the Evidential KiwiSaver Scheme. For more information on Evidential KiwiSaver Scheme including a copy of the Product Disclosure Statement, visit www.evidential.co.nz