Financial markets steadied through June 2026 after a jittery start, as easing energy prices, resilient economic growth and continued AI investment gave both shares and bonds a more constructive backdrop. Central banks stayed firmly focused on inflation, with the European Central Bank delivering its first rate rise since 2023 and the Bank of Japan lifting rates to its highest levels since 1995. Locally, the NZX 50 rose 3% and NZ government bonds returned 1.3%, while the main US share markets dipped as investors began to question whether AI companies had become too expensive.

Note: This update follows a strong May, when global shares rebounded and technology led the way. If you missed it, you can catch up on What happened in May 2026 at simplicity.kiwi/learn/updates/market-commentary-may-2026.

Three themes still driving markets in 2026

June was a month of two halves. Geopolitical tensions and uncertainty over government policy weighed on investor sentiment early on, but markets (and returns) found their footing as attention turned to steady economic growth, ongoing AI investment and easing energy prices. The start of the FIFA World Cup in North America helped shift the spotlight away from Middle East tensions, while falling oil prices eased inflation worries and supported both share and bond markets.

Three themes continued to shape returns: “hawkish” central banks (meaning a lean towards higher interest rates), ongoing AI investment, and a tentatively improving geopolitical backdrop. These have largely driven markets throughout 2026, and they help explain the wide performance gaps we keep seeing across regions, sectors and asset classes.

Central banks: inflation stays front of mind

Central banks kept their focus squarely on inflation. The European Central Bank (ECB) delivered its first interest rate increase since 2023, while the Bank of Japan raised rates to 1.0%, its highest level since 1995. In the United States, the Federal Reserve - AKA the Fed - left rates unchanged, but adopted a more hawkish tone under new Chair Kevin Warsh. Investors increasingly expect further rate rises over the rest of the year, as central banks weigh up strong economic growth against inflation that is still too high.

United States: a resilient economy, a cooler tech trade

The US economy continued to look remarkably resilient. Employment growth stayed solid, unemployment remained low, and business activity expanded. Economic growth for the first quarter, measured by GDP (gross domestic product: the total value of everything a country produces), was revised higher - reinforcing the view that momentum is holding up despite higher interest rates. Inflation is still running above target, but investors took some comfort from signs that price rises are not speeding up sharply for now.

Shares told a slightly different story. AI remained one of the most powerful forces in the market and semiconductor companies (the firms that make the computer chips powering AI) kept benefiting from strong demand. But investors began asking harder questions about whether the enormous sums being poured into AI will actually pay off. Those doubts weighed on the share prices of some of the large technology companies funding these projects, and the two main US share indices fell back as a result: the S&P 500 finished the month down around 1.1% and the tech-heavy NASDAQ down about 2.8%. Despite the wobble, AI remains a dominant long-term investment theme.

There was also plenty of activity in the share market itself. The much-anticipated SpaceX float became one of the largest IPOs (initial public offerings, where a company sells shares to the public for the first time) on record, showing that investors still have a strong appetite for fast-growing, innovative companies. Several other US companies also raised money by listing or issuing new shares during the month, adding to the heightened activity.

Europe and the United Kingdom: cheaper energy lifts the mood

Regional performance was mixed, but Europe was among the strongest developed markets as lower energy prices eased inflation concerns and improved corporate earnings expectations. The MSCI Europe ex-UK Index rose around 3.6% in euro terms. UK shares lagged the rest of the European continent, with political uncertainty and weakness in energy and materials shares holding overall returns back.

Asia and emerging markets: Japan leads, China lags

Japanese shares performed strongly in local currency terms, with the Nikkei 225 up about 5.7% for the month. China stayed under pressure as concerns about soft consumer demand and slowing growth persisted. Emerging markets were mixed after a particularly strong previous quarter. AI-linked markets such as Taiwan and South Korea remained buoyant, while others faced headwinds from domestic policy concerns, softer commodity prices and currency swings. 

Australia and New Zealand: the NZX outpaces the ASX

Closer to home, the NZ market was broadly positive, with the NZX 50 up a strong 3% for the month. Australian shares also rose, albeit being outpaced by NZ this time. The ASX gained around 0.6% in June, helped by their weighting towards mining and dividend-paying companies, even as they missed much of the AI-driven rally powering markets offshore.

Away from the markets, KiwiSaver policy is becoming a hot topic here at home. Our MD Sam recently looked at National's proposed KiwiSaver changes and why making retirement savings part of the election debate could benefit savers and the wider economy over the long run. You can read his take here.

Interest rates and bonds: yields ease as oil falls

Fixed income had a steadier month than shares, generating modest positive returns across bond markets. Government bond yields generally fell as lower oil prices pulled inflation expectations down (just a reminder, bond prices tend to rise when yields fall, and vice versa). With central banks still cautious in their increases, but tensions between countries easing and economic growth holding up, the backdrop was supportive for bond investors.

NZ government bonds were particularly strong, returning 1.3%. NZ corporate bonds rose nearly 1%, comfortably ahead of the more modest 0.3% growth seen in global corporate bonds hedged to the NZ dollar.

What investors are watching next

A few things will likely shape the second half of the year:

• Central bank direction - with the ECB and Bank of Japan now raising rates, investors will watch whether the Fed's tougher talk on inflation turns into actual rate rises.
• The AI question - whether all the money being spent on AI starts to pay off, and whether the market's gains can spread beyond a handful of big companies.
• Inflation and energy - oil prices remain a key swing factor for both inflation and bond markets.
• The local picture - NZ and Australian growth signals, and any shift in the Reserve Bank of New Zealand's (RBNZ's) thinking.
   

TL;DR - June 2026 summary

• Markets steadied through June as easing energy prices and resilient growth outweighed a jittery start.
• The ECB raised rates for the first time since 2023, and the Bank of Japan lifted rates to 1.0%, a level not seen since 1995.
• Headline US indices eased - the S&P 500 down around 1% and the NASDAQ almost 3% - as investors questioned stretched AI valuations.
• Europe was among the strongest developed markets; Japan led growth in Asia
• The NZX 50 rose 3% and the ASX 200 gained 0.6%.
• NZ government bonds returned 1.3% and NZ corporate bonds nearly 1%, ahead of global corporate bonds hedged to NZD at 0.3%
   

June was a useful reminder that markets rarely move in a straight line, and that different regions and asset classes can head in different directions in any given month. That is exactly why diversification across geographies, sectors and asset classes matters: a well-spread portfolio smooths out the peaks and troughs over time, so no single month, or single theme, carries the whole load. If you have questions about your investment settings or what recent market movements mean for your KiwiSaver or investment funds, our team is here to help.

The information provided and opinions expressed in this article are intended for general guidance only and not personalised to you. These materials do not take into account your particular financial situation or goals and are not financial advice or a recommendation. This article is not intended to convey any guarantees as to the future performance of any of the investment products, asset classes, or capital markets mentioned. Past performance is no guarantee of future performance. Information is current at the time of posting, and subject to change without notice. Simplicity NZ Ltd is the issuer of the Simplicity KiwiSaver Scheme and Investment Funds. For Product Disclosure Statements please visit our website simplicity.kiwi.