June Quarter 2026
The second quarter of 2026 was, in many respects, the mirror image of the first. Where January to March brought geopolitical shock, rising rates and falling markets, the April to June period delivered a meaningful change in conditions, and our investments reflect it.
All three Empire SMA portfolios delivered positive returns for the quarter ending 30 June 2026. The Balanced Income portfolio returned 3.65 per cent, Balanced Growth returned 4.85 per cent, and the Growth portfolio returned 6.40 per cent, each net of fees and costs.
A Changing Landscape
The central event of the quarter was the ceasefire signed on 17 June and the subsequent reopening of the Strait of Hormuz. Together, these developments unwound much of what had driven the first quarter. Oil prices fell sharply, inflation expectations eased, and the Reserve Bank of Australia, which had raised the cash rate three times in the preceding months, held steady at its June meeting for the first time this year.
Global share markets responded strongly. International equities had a broad-based positive quarter, with gains extending across both large and small-cap markets as confidence returned. Australian shares were more measured, with the domestic economy still absorbing the effects of higher interest rates but still delivered a positive result. Listed property, which had been among the weakest performers in the first quarter as rates rose, recovering sharply at least partly in response to some bond yields beginning to fall. For investors in fixed interest and credit, the backdrop was constructive throughout.
Not everything recovered. Gold, which had performed strongly in the first quarter as geopolitical tension ran high, gave back a large portion of those gains as the risk environment eased. This is what gold is in these portfolios for: it tends to perform best during periods of stress and uncertainty, and it is expected to give some of that back when conditions improve. Over the first half of the year taken together, it more than earned its place.
How Our Portfolios Responded
The Balanced Income portfolio’s recovery was led by property and international equities. The credit and fixed interest sleeve, the portfolio’s largest allocation, contributed steadily throughout the quarter, providing the income consistency this model is built to deliver. The structural overweight to Australian shares, held to maximise franking credit income, contributed positively to returns but was a detriment in a relative sense, as global shares had stronger performance.
The Balanced Growth portfolio showed why diversification across multiple asset classes matters across a full market cycle. In the first quarter, infrastructure and alternatives softened the blow when equities fell. In the second, equities and property led while those same diversifying assets gave back ground. Across both quarters combined, the portfolio delivered through a volatile period without sharp losses in the downturn or outsized reliance on a single driver in the recovery. The Australian equity sleeve was a particular source of strength this quarter, with active managers adding meaningfully.
The Growth portfolio’s higher allocation to shares meant it captured the most from the second quarter’s recovery, producing the strongest result of our models. The international equity sleeve, which includes active managers with quite different approaches to global stock selection, added some differentiated sources of return. Gold was a more significant drag here than in the other models given its higher weight, but across both quarters the portfolio continued to deliver the kind of return its longer time horizon warrants
Taking A Longer View
Looking across the full twelve months to 30 June 2026, a period that included a sharp equity sell-off, an energy price spike, multiple rate rises, and a significant geopolitical event, all three portfolios have delivered solid positive returns. These outcomes were not the product of predicting what would happen. They came from holding well-constructed, diversified portfolios through a period of real uncertainty.
Empire’s investment philosophy is built on diversifying portfolios by accessing various strategies and managers across different asset classes, both to navigate market conditions and to capture growth opportunities. The last two quarters have illustrated what that means in practice. When oil prices surged, infrastructure held up while equities fell. When they reversed, equities and property recovered while gold gave back ground. Within equities, active managers selected through rigorous research and analysis produced meaningfully different outcomes to one another and to the index. These were not incidental results. They reflect the deliberate portfolio construction decisions that sit at the heart of how Empire manages your investments.
Looking Forward
We end on a similar note to last quarter; uncertainty has not disappeared. The ceasefire remains fragile, and the deeper diplomatic questions underlying it are unresolved. Australian inflation, while easing from its energy-driven peak, remains above the Reserve Bank’s target range, and the central bank has signalled that further rate moves remain possible. Global interest rate policy is moving in different directions across major economies, which tends to keep currency and bond markets active.
Your portfolios are built for this kind of environment. They hold businesses with the financial strength to manage difficult conditions. They are diversified in ways that do not require a single scenario to play out, and the active managers within them have the discretion to respond as conditions evolve.
If you would like to discuss your portfolio or what current conditions mean for your financial position, please speak with your advisor.
