What the 2025-26 financial year taught investors and what may come next
The 2025-26 financial year saw plenty of action - from conflict in the Middle East to rising interest rates and stubborn inflation. Yet returns on most major investment markets were pretty good.
Let's break things down to see which investments topped the leaderboard, and what may lie ahead in 2026-27.
Investment market returns for 2025-26
|
Asset market |
1-year return |
|
Emerging market shares |
36% |
|
US tech-heavy shares (Nasdaq-100) |
28% |
|
US shares (S&P 500) |
17% |
|
Gold |
16% |
|
International shares |
15% |
|
Australian shares |
6% |
|
Cash (bank bills) |
4% |
|
Bitcoin |
-48% |
Returns are for the year to 30 June 2026 and shown in Australian dollars. Sharemarket returns include dividends. Gold and Bitcoin figures reflect price movements. Sources: MSCI, Nasdaq, S&P Dow Jones Indices, RBA, ABC Bullion and Independent Reserve.
AI fuelled double-digit sharemarket gains...
A key driver of stock market gains in 2025-26 was the tech sector, particularly the growth of artificial intelligence (AI) and the demand this is creating for semiconductors.
Emerging market shares delivered a blockbuster performance, with total gains of 36% for the year. This too was all about tech. A handful of companies including Taiwan Semiconductor Manufacturing Company, South Korea's Samsung Electronics, and Tencent Holdings and Alibaba (both based in China), dominated emerging market returns for the financial year.
No prize for guessing that the tech-heavy Nasdaq-100 Index notched up impressive gains of 28% in Australian dollar terms. And, with tech stocks making up more than one-third of America's broader S&P 500 Index, their strong performance helped lift US shares, which returned 17%.
International shares, meanwhile, surged 15% over the 12 months.
...but not in Australia
Without a significant homegrown tech sector, Aussie equities missed out on the tech rally, finishing the year way down the leaderboard with total returns (dividends plus capital growth) of 6%.
That said, our sharemarket holds a valuable trump card: it's one of the highest-yielding equity markets in the world.
ATO figures for January 2026 put average dividend yields on Australian shares at just over 3%. Add franking credits, which reflect company tax already paid, and the combined yield was close to 4%.
Key takeout for 2026-27
I doubt anyone knows for sure whether the tech rally has further to run.
What I can say is that 2025-26 confirmed the value of holding international shares. They bring diversification and access to industries and companies that simply aren't represented on the local market. The good news is that global ETFs make it easy to invest internationally.
Gold shone brightly but lost some of its lustre
Gold started the financial year at around $US3,300 an ounce and soared to an intraday record of almost $US5,600 in late January. It initially rose after the US-Iran conflict began, but then fell sharply as higher oil prices fuelled inflation and interest-rate fears.
By 30 June gold was trading at around $US4,000 - about where it was last November.
Key takeout for 2026-27
As is so often the case, plenty of people piled into gold just as the price was hitting a peak. Chances are, many are now nursing losses.
Gold-focused ETFs have made gold a lot more accessible. But 2025-26 offered a reminder that FOMO (fear of missing out) is never a good basis for investing.
Cash - higher returns only just kept pace with inflation
Three rate hikes during the financial year saw the 'advertised' rate on deposits rise to 4.80% by June 2026. Sounds good, but that's only just ahead of annual inflation, which was 4.0% in May.
The trouble is, you may not be earning your bank's advertised rate.
Canstar research found that complex conditions mean two in five people with a bonus savings account miss out on the top rate each month.
That makes it worth checking your savings accounts to see what your money is really earning. It could be less than you expect.
Key takeout for 2026-27
Several of the big banks - CommBank, NAB and ANZ - are predicting rates could stay on hold for a while, potentially well into next year.
This being the case, it makes sense to be sure your cash is working hard throughout 2026-27.
A simple account with a decent no-strings-attached rate could offer more bang for your buck than a bonus rate saver.
Or, to really put spare cash to work, think about paying down high-interest debt (like a credit card).
If you're comfortable taking on more risk, consider investing, rather than saving, at least part of your surplus cash.
Bitcoin scored the wooden spoon
An Independent Reserve survey found one in three Australians had invested in or held cryptocurrency. That's starting to make digital currencies like Bitcoin look more mainstream, though this doesn't make crypto any less volatile.
And we saw plenty of that last financial year.
Bitcoin started the financial year trading at A$163,529, later reached a record high of around A$190,500, and then fell to A$85,027 by 30 June. That left it almost 50% below where it started and back around levels seen in February 2024.
Key takeout for 2026-27
There are several reasons why crypto has dropped, including investors preferring to put money into the AI boom.
It's not the first time we've seen this sort of downturn, and I doubt it'll be the last.
When it comes to digital currencies, the standard disclaimer applies. Only invest what you can afford to lose.
Sure, at some point in the future digital currencies may play a valid role in global financial systems. Right now that's not the case.
A report by Independent Reserve found that 30% of Aussie investors said their bank had blocked or delayed transfers to a crypto exchange. In my books, that's a serious red flag.
Preparing for the year ahead
As we sit at the start of a new financial year, there's still no clear resolution to the conflict in the Middle East. Until this happens, we could continue to see high inflation driven by shaky fuel prices and, as a consequence, little reprieve from today's higher interest rates.
Yes, we all face uncertainty, and I don't pretend to know how the financial year will unfold. But you can help set yourself up for long-term success by sticking to a tried-and-tested investment formula:
- Invest regularly to take advantage of dollar cost averaging
- Benefit from diversity by investing across different assets and markets
- Take a long-term view, and
- Invest in line with personal goals - not media headlines.
Here's to a prosperous new financial year for all of us!
Frequently Asked Questions about this Article…
For the year to 30 June 2026 (in Australian dollars), emerging market shares led with +36%, the Nasdaq-100 (US tech-heavy) returned +28%, the S&P 500 (US shares) +17%, gold +16%, international shares +15%, Australian shares +6%, cash (bank bills) +4%, and Bitcoin finished worst at about -48%.
The tech and AI boom drove much of the market gains. Demand for AI-related chips and services lifted semiconductor and big-tech names — for example Taiwan Semiconductor Manufacturing Company, Samsung Electronics, Tencent and Alibaba — which powered emerging markets. The Nasdaq-100, heavy in tech, also benefited and helped lift broader US returns.
Australia’s market lacks a large homegrown tech sector, so it missed much of the AI-fuelled rally. That said, Australian shares remain attractive for many investors because of comparatively high dividend yields: ATO figures (Jan 2026) put average dividend yields just over 3%, and with franking credits combined yields were close to 4%.
Gold jumped from around US$3,300/oz to an intraday record near US$5,600 in late January after the US–Iran conflict, then fell as higher oil prices stoked inflation and rate fears, finishing around US$4,000 by 30 June. The key lesson: many investors bought near the peak, showing FOMO can lead to losses. Gold ETFs make access easy, but timing remains risky.
Advertised deposit rates rose to about 4.80% by June 2026, while annual inflation was around 4.0% in May — so returns only just outpaced inflation. Remember you may not earn the advertised rate: Canstar found two in five people with bonus accounts miss the top rate each month. Check the real rate you’re earning, consider simple no-strings accounts, and ensure cash is working hard into 2026-27.
Bitcoin started the year near A$163,529, briefly hit about A$190,500, then dropped to A$85,027 by 30 June — roughly a 48% fall. Contributing factors include investor money flowing into the AI boom and crypto’s inherent volatility. The article reminds investors: only put in what you can afford to lose, and note issues such as banks blocking or delaying transfers to crypto exchanges (reported by Independent Reserve) are potential red flags.
2025-26 showed the benefit of international exposure: it gives access to industries and companies not well represented locally (notably big tech and semiconductors). Global ETFs make it simple to diversify across countries and sectors, which can reduce concentration risk and capture growth overseas.
Given geopolitical uncertainty, higher inflation and interest-rate risks, the article recommends a simple, long-term approach: invest regularly to benefit from dollar-cost averaging; diversify across assets and markets; stick to a long-term view; and align investments with your personal goals rather than media headlines. Also consider using spare cash to pay down high-interest debt, compare savings accounts for real returns, or invest some surplus if you’re comfortable with the risk.
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