October saw financial markets continue to navigate a challenging backdrop of persistent inflation, elevated interest rates and ongoing geopolitical uncertainty. While global share markets remained broadly resilient, investor sentiment was influenced by inflation data, central bank commentary and developments across several geopolitical hotspots. The month reinforced the importance of maintaining a disciplined investment approach amid an environment where economic and policy outcomes remain uncertain.

Economic environment 

Global economic growth remained positive throughout October, supported by relatively strong labour markets, ongoing business investment and continued technological innovation. However, inflationary pressures remained a key concern across many developed economies, with policymakers continuing to balance price stability against slowing economic growth.

Energy prices, wage growth and ongoing supply chain vulnerabilities remained contributors to inflation, while government spending programs across several major economies continued to support economic activity. Markets remained particularly sensitive to economic data releases and any signals regarding future monetary policy settings.

Australian economy, inflation & interest rates 

Inflation remained a central challenge for the Australian economy during October. Cost-of-living pressures continued to affect households through higher housing costs, insurance premiums, utilities and everyday services. Despite slower economic growth in some sectors, inflationary pressures remained sufficiently elevated to warrant continued caution from policymakers.

The Reserve Bank of Australia (RBA) maintained its focus on returning inflation to a sustainable level, with interest rates remaining at restrictive levels. Financial markets continued to debate the future path of monetary policy. However, inflation remained the dominant consideration influencing interest rate expectations.

For borrowers, higher interest rates continued to place pressure on household budgets and business financing costs. Conversely, investors benefited from stronger yields available through cash investments, term deposits and high-quality fixed income securities.

The outlook remains heavily dependent on future inflation outcomes. Until inflation shows convincing signs of returning to target levels, interest rates are likely to remain elevated, reinforcing the “higher for longer” theme that has characterised much of 2026.

Geopolitical developments 

Geopolitical risks remained elevated throughout October and continued to influence global markets. Ongoing tensions in the Middle East, strategic competition between major global powers, trade policy uncertainty and supply chain security concerns remained key areas of focus for investors.

Defence spending, energy security and shifting trade relationships continued to impact commodity markets and inflation expectations. These developments served as a reminder that geopolitical events can have significant economic consequences, particularly through their influence on energy prices, global trade flows and investor confidence.

While geopolitical events can create periods of heightened volatility, history demonstrates that diversified portfolios are generally well positioned to withstand short-term disruptions while remaining focused on long-term investment objectives.

Investment market performance 

Global equity markets generally remained resilient during October, supported by solid corporate earnings and ongoing enthusiasm surrounding artificial intelligence, automation and digital infrastructure investment. Large technology companies continued to attract investor attention, although periods of market volatility emerged as investors reassessed valuation levels and interest rate expectations.

Australian shares delivered mixed sector performance. Financial stocks remained relatively well supported by the elevated interest rate environment, while resource companies experienced fluctuations driven by commodity prices, Chinese economic activity and changing global demand expectations.

Fixed income markets continued to play an increasingly important role within diversified portfolios. Higher bond yields allowed investors to access attractive income opportunities while also improving the diversification benefits traditionally provided by fixed interest investments.

Summary 

October highlighted the ongoing tension between resilient investment markets and persistent inflationary pressures. While share markets continue to benefit from strong corporate earnings and technological innovation, inflation remains a core challenge for policymakers and investors alike. Elevated interest rates, geopolitical uncertainty and economic variability are likely to remain defining themes as we approach the end of 2026.

For long-term investors, maintaining a diversified portfolio aligned with personal goals and risk tolerance remains the most effective strategy for navigating an environment where inflation, interest rates and geopolitical developments continue to influence market outcomes.

This update is general information only and does not consider your personal objectives, financial situation or needs. You should consider the appropriateness of any strategy in light of your circumstances and seek professional financial advice before making investment decisions.