Market commentary, September 2026

Written by Bevan Graham, Economist, Salt Funds Management (part of the Group behind the Summer KiwiSaver Scheme).

September proved to be a challenging month for financial markets. Global share markets generally moved lower as investors confronted rising oil prices, higher interest rates, and a significant increase in government bond yields.

Importantly, however, the underlying global economy remained relatively resilient, particularly in the United States, where consumer spending and business investment continued to support growth.

In keeping with recent months, geopolitical developments remained an important influence. Tensions between the US and Iran intensified again during September, as both sides failed to agree on the terms of a long-term ceasefire. The ongoing impasse pushed oil prices higher and reminded investors that the energy shock experienced earlier this year has not entirely disappeared.

As a reminder, higher energy prices have implications beyond the petrol pump - they reduce household purchasing power and increase costs for businesses, while also making the task of returning inflation sustainably to target more difficult for central banks.

For all the turbulence, however, the US economy continued to perform better than many had expected. Economic activity remained solid, supported by resilient consumer spending and significant investment in technology and artificial intelligence. That resilience is fundamentally good news for global investors, but it has also contributed to a reassessment of how restrictive monetary policy needs to be. Importantly, the recent rise in bond yields appears to reflect stronger economic growth and greater demand for capital, as well as concerns around inflation and government borrowing.

On inflation and monetary policy, September marked an important shift. In America, the US Federal Reserve - commonly referred to as the Fed - increased interest rates by 0.25 percentage points as it sought to ensure inflation returns sustainably to its 2% target).

At home, the Reserve Bank of New Zealand also increased the Official Cash Rate by 0.25 percentage points to 2.75%, continuing the gradual removal of monetary stimulus as the domestic economic recovery becomes more established. Inflation remains elevated in New Zealand, although much of the recent increase reflects higher global fuel prices, and underlying measures of inflation remain considerably better behaved.

At the end of the month, the Reserve Bank of Australia also increased its cash rate as persistent inflation continued to concern policymakers, despite growing signs that higher interest rates are beginning to weigh on economic activity.

Taken together, these decisions reinforce the message that the global monetary policy cycle has shifted: the debate is increasingly about how much tightening is required (i.e. how many interest rate rises are coming) rather than when central banks will next cut interest rates.

Asset class snapshot

Across the month, equity markets struggled against the backdrop of rising interest rates and bond yields.

Global shares generally declined, although the US market proved relatively resilient as continued enthusiasm around AI supported large technology companies.

Beneath the surface, however, market performance was considerably more mixed, reinforcing the importance of diversification rather than relying too heavily on the handful of companies that have driven much of the recent market strength.

From an asset class perspective, it was bond markets that generated most headlines. September was an especially difficult month, as government bond yields moved sharply higher across many developed economies. Strong economic growth, persistent inflation, heavy government borrowing and increasing demand for capital all contributed.

Longer-term yields also continue to reflect concerns around high and rising levels of government debt, especially in the US, and the additional return investors require to commit money for long periods. For investors, however, there is another side to the story - higher yields mean prospective returns from fixed income are becoming increasingly attractive (for those who haven’t already locked in and/or can redeploy capital).

What this may have meant for you

September provided a useful reminder that investment markets rarely move in straight lines. Economic growth and corporate earnings remain reasonably supportive in 2026, but higher interest rates, elevated bond yields, and geopolitical uncertainty are creating a more challenging environment in the tail-end of the year

For diversified, long-term investors, periods such as this reinforce the value of maintaining exposure across different asset classes (as well as geographies, sectors, and more) rather than attempting to predict every short-term market move.

Broadly speaking, this year has so far rewarded investors who have stayed patient and have maintained diversified holdings. In that context, September's volatility is better viewed as part of the normal ebb and flow of investment markets rather than a reason to change a long-term investment strategy.

In the coming months, investors will continue to navigate uncertainty around geopolitics, inflation, interest rates and government policy. Periods of short-term volatility are therefore likely to remain a feature of markets, reinforcing the importance of staying focused on long-term investment goals.

About the author:

Bevan is the Economist at Salt Funds Management and is based in Wellington.

He began his career in retail banking, firstly at ANZ followed by Westpac, where he became the bank’s Chief Economist in 1994.  In 1999 the opportunity arose to work in the New Zealand Parliament as Chief Advisor to the Leader of the Opposition.  Following that, Bevan became the Chief Executive at the Economic Development Association of New Zealand.

Bevan was appointed Chief Economist at AXA Global Investors in 2008, which transitioned to NZ Chief Economist at AMP Capital following the merger of the two companies in 2011.  Bevan’s most recent role at AMP Capital was as the firms Chief Economist and Managing Director.

While at AMP Capital, Bevan was appointed to the Government’s Māori Economic Development Panel in 2012.  The Panel produced the Māori economic development strategy and action plan He kai kei aku ringa.

Bevan has a Bachelor of Social Sciences (B.Soc.Sci) degree from Waikato University, majoring in Economics.