The good, the bad and the ugly all at once
April 2026
The first quarter of 2026 is best described as a tale of two halves for investors in diversified portfolios.
January began like 2025 ended – the global economy was looking in good shape and earnings produced by listed companies were expected to rise. Investors continued to pour money into rising sectors such as materials, gold and emerging stockmarkets. The Aussie dollar rallied against the U.S. dollar too, making global shares look relatively cheap in comparison to previous quarters.
Come February and the tale turned on its head. The bad news began when almost US$1 trillion
1
was wiped off U.S. technology shares early in the month, following fears subscription software-as-a-service (SaaS) business models would be disrupted by rapidly evolving artificial intelligence (AI) models. Shares in the Australian tech sector – which is dominated by software developers – fell 40% too. Dubbed the ‘SaaSpocalypse’, the software sell-off was sparked when U.S. company Anthropic released new AI tools which allow businesses to use AI agents to assist with functions that traditionally rely on software – such as sales, marketing, finance and human resources.
Then of course, came the U.S.-Israel-Iran conflict and closure of the Strait of Hormuz. A surge in oil prices pushed inflation higher and investment markets lower. Global shares (including Australia) lost more than US$11.5 trillion
2
in value and bonds declined by US$2.5 trillion
3
through March.
Two cash rate hikes by the Reserve Bank of Australia, in February and March, in a bid to curb inflation also dampened sentiment among local investors.
However, the overall drop in the local market over the quarter masked a divergence between sectors. The double-digit fall in ASX-listed IT companies was at odds with a close to 30% gain
4
in energy shares, while other sectors landed in between.
Commonwealth Bank was a quiet standout. Its share price jumped 15% in a couple of weeks to $179.67
5
after the bank announced a 5% rise
6
in net profit for the first half of the financial year. Its gains reflected a flight to quality during market volatility and rewarded investors who took a long-term view when the bank’s share price fell late last year.
There were other positive signs as the first quarter ended. U.S. shares began to gain ground, largely because the country is more insulated from higher oil prices than Europe. Analysts also upgraded their estimates of the likely future earnings of U.S. companies, particularly energy and technology firms.
Meanwhile, there were small pockets of gains in commodities such as copper and listed infrastructure companies.
1 Selloff wipes out nearly $1 trillion from software and services stocks as investors debate AI's existential threat | Reuters
2 Bonds Lose $2.5 Trillion in Iran War Wipeout That Mirrors 2022 - Bloomberg
3 ibid
4 Market Index, S&P/ASX 200 Energy Sector
5 Bloomberg
6 https://www.commbank.com.au/newsroom/features/financial-results.html
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