Australian shares have closed the financial year just 2.8 per cent higher after a battering from Donald Trump’s war and the Reserve Bank’s three interest rate hikes.
The benchmark S&P-ASX200 finished at 8778 points on Tuesday afternoon marking the softest year since 2022.
Local shares dramatically lagged white hot growth on major overseas exchanges for the past 12 months including New York’s S&P500 and London’s FTSE100.
Both rocketed close to 20 per cent thanks to investor enthusiasm about artificial intelligence.
Australia’s flat year came despite the index hitting record highs and breaking through 9000 points in August and surging even higher to 9200 early in 2026.
But the big rise stalled in March thanks to overseas tensions and the ongoing scourge of inflation.
Shares dived almost 10 per cent in the aftermath of the US President’s strikes in the Middle East and Iran’s swift response to shutdown a key energy supply route through the Strait of Hormuz.
AMP chief economist Shane Oliver said the ASX’s performance had been “okay . . . not disastrous” as returns would be above inflation when factoring in dividends.
“It’s been a bit of a blah blah year,” he told The West Australian.
“We had a strong start with the market getting above 9200 points at one stage. And then of course (it) got whacked by the war with Iran and we’ve struggled to recover from that.”
Dr Oliver said the RBA’s aggressive fight against inflation and a lack of exposure to AI and tech stocks in Australia would also be factors as to why local shares underperformed.
Local shares had been supported by a profit upswing early in the year but he said “the war started and blew all that out of the water”.
“We’ve certainly been a significantly laggard. Sooner or later things will turn around.”
Australian Shareholders’ Association chief Rachel Waterhouse said resources companies had a strong year while healthcare and local tech had been under “significant pressure”.
“FY26 was not a uniform market. The ASX 200 finished higher, but investors had very different experiences depending on which sectors and companies they held,” Ms Waterhouse said.
Gold — which had captured the attention of retail investors last year with a surging price — gave up most of its gains and was trading about $US4000 ($5800)an ounce at the time of writing.
The precious metal’s price is nonetheless about 20 per cent higher than this time last year.
Yet the news for Aussie savers was not all grim.
Balanced local superannuation funds were tipped to earn returns of between 8 and 10 per cent according to estimates from ChantWest and SuperRatings.
Those numbers would be boosted by growing exposure to overseas markets for the super sector.
Lithium miners were standout performers with four among the top 10 performers on the ASX200 — Elevera Lithium, PLS, Liontown Resources and Mineral Resources.
Shares in contractors SRG Global and NRW Holdings both more than doubled.
Top of the ladder was medical tech company 4DMedical with a price rise of nearly 1800 per cent.
The Reserve Bank’s meeting minutes from earlier this month, released on Tuesday, weighed in on why Australian shares had been flat compared to overseas markets.
Strong earnings expectations had supported stocks in the US. But in Australia there had only been “modest upward revisions to the outlook for company earnings”.
In addition to the three rate hikes and lack of exposure to AI, RBA bosses said slow productivity growth and “the expected impact of announced tax changes on bank lending” would also be factors.
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