Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 661

Shares rebound on hopes of war ending, but stalemate the likely outcome

The following is an abridged version of Ashley Owen’s monthly snapshot. You can read the full version here.

Here’s my quick wrap-up on global markets for serious long-term Aussie investors – including shares markets, interest rates, inflation, bonds, currencies, commodities, and more, including portfolio implications.

Key points:

  • Share markets around the world rebounded in April after a very brief war / inflation scare in March, but the ASX remains a global laggard.
  • Investors have two positives to support their bullishness. The first is hope that Trump retreats (dressed up as an epic ‘win’ of course) because his most urgent goal is to get fuel prices down in order to retain MAGA voters in the November mid-term elections.
  • The second positive is strong US profits, thanks to tech / ai, and the bonanza for fossil fuel producers like the US.
  • The war continues, but is increasingly looking like a stalemate, probably with higher energy prices and inflation for a while yet. Rate cuts or rate hikes?
  • Share markets everywhere (not just US tech) are still vastly over-priced on numerous measures – including and especially in Australia. A major global correction is due.
  • Bond markets posted more losses again as yields kept rising in expectation of higher inflation and interest rates ahead.
  • The AUD rose and US dollar fell with the share rebound, as per the usual pattern in global panics / rebounds.
  • Commodities prices mostly rebounded in April, benefiting ASX resource stocks.

But first - my essential 1-page snapshot chart - covering Australian and US share markets, short and long-term interest rates, inflation, and the AUD/USD exchange rate. It is my go-to chart that tells me what happened when and why, whenever answering queries from advisers, investors, doing webinars, market updates, etc.


Click to enlarge

Not only does this have all the detail I need to answer investor questions from advisers, but even from the back of the room you can easily see the big picture on where we are for share markets, currency, inflation, long & short interest rates.

I will get into shares in a moment, but from the back of the room you can see that share markets had a minor hiccup in March (top right corner of the chart – red for US, green for ASX), but are back on track in April.

Bottom line – if you were rattled by the volatility and price falls in March then you ain’t seen nothin’ yet! (or you are too young to remember what a decent sell-off looks and feels like!)

Share markets

Global share markets rebounded in April after the brief sell-off in March when panicking investors sold down just about everything except for oil/gas stocks profiting from higher prices with the Strait of Hormuz closed.

The next charts show total returns from global industry sectors for April 2026 (middle chart), calendar year to date (right), compared to 2025 (left chart):


Click to enlarge

The stand-out sector up is fossil fuels (‘energy’) – with across-the-board double-digit rises in the major stocks as they profit most from the global supply squeeze.

Major country share markets

Share markets almost everywhere had a great month in April. Here are the main markets:


Click to enlarge

Best of the major markets has been Japan, led by Softbank (big Facebook holding plus other US tech bets), Keyence (robotics), and Shin-Etsu Chemical (plus assisted by weaker yen). Next best was the US (tech/ai giants).

So far in 2026 global share markets are ahead by 6% (in local currency terms). This may make it a fourth good year in a row in the current boom, following three very strong years averaging +20% per year in 2023, 2024 and 2025.

Share markets everywhere (not just US tech/ai stocks) are still vastly over-priced on a variety of measures – including and especially in Australia, and we are well and truly due for a global correction. Refer to the above reports on share market pricing.

Inflation & interest rates

A stalemate in the US/Iran looking like a reasonably likely outcome would mean above-target inflation lasting longer (after short-term rises).

Despite inflation remaining sticky around the world, central banks have mainly held cash rates flat this year – taking a middle road between further rate HIKES to reduce spending and inflation, versus rate CUTS to stimulate slowing economies due to higher prices. In the US, Jerome Powell had his final meeting as Chair of the US Fed rate-setting board, which voted to keep rates flat.

Australia is the exception of course. The RBA has been the only central bank in the world to switch from rate cuts after the 2021-23 inflation surge, back to rate HIKES – with three hikes so far this year (February, March and May).

Even before the latest war on Iran, Australia already had the HIGHEST cash rate amongst its peers – because we have the highest inflation, the highest inflation expectations (treasury yields), the loosest/highest inflation target, and the lowest unemployment rate among our peers.


Click to enlarge

It now remains to be seen how expansionary / inflationary the upcoming May Federal Budget actually is. (The budget will range somewhere between ‘highly expansionary / inflationary’ and ‘ridiculously expansionary / inflationary’). Apologies once again to my kids and future grandkids who will be paying for this chronic fiscal diarrhoea through higher interest rates and taxes for the rest of their lives.

Either way, more rate hikes are on the way if inflation is to be returned to target range.

Trump’s agenda?

The following is what I said in my end of March report:

The most important factor for the direction of short-term investment markets prices will be Trump’s twists and turns on the war front (or tariff front, or any of his other hobby horses du jour). Not even Trump knows what he will say or do one minute to the next, so it is pointless trying to guess.

However, I have two fairly sound reasons for being relatively positive for share markets in the coming months.

First - Trump probably has one central aim in the short term: to retain MAGA votes in the November mid-term elections. To do that he must (1) get oil prices down, and (2) minimise the number of Americans coming back in body bags.

This points to a relatively quick end to the war. Or at least an end to disruptions in oil/gas supplies, which means opening the Strait of Hormuz to restore normal shipping.

Second – in the event of a sharp economic recession, governments of all flavours in the US, Australia and just about everywhere else no longer have any notion of fiscal discipline. They have shown in the GFC and Covid that they will literally throw ‘free’ money at anything and everything in order to retain populist votes. Politicians no longer have the stomach nor the intellectual framework for ‘tough medicine’, ‘business cases’, trade-offs, or discipline.

The longer-term consequences and downsides will be even higher debts and widening intergenerational inequity, but it supports asset prices in the short-medium term.  The current global tech/everything boom is being held up by hopes of endless monetary and fiscal profligacy.

This theory remains my Base Case scenario. Trump is desperate to get out but it must be with him ‘winning’. The problem is finding something to call a ‘win’. He is now reduced to a rather tiresome tirade of threats, then backdowns, then mysterious alleged ‘negotiations’ with nameless parties on behalf of Iran about a so-called ‘deal’, then more threats, and more back-downs.

The most likely outcome is probably yet another humiliating US withdrawal dressed up as a ‘win’, but leaving a festering mess behind.

 

Ashley Owen, CFA is Founder and Principal of OwenAnalytics. Ashley is a well-known Australian market commentator with over 40 years’ experience. This article is for general information purposes only and does not consider the circumstances of any individual. You can subscribe to OwenAnalytics Newsletter here.

 

  •   6 May 2026
  • 4
  •      
  •   
4 Comments
James#
May 08, 2026

Maybe if Iran stayed in it's own sandpit and didn't relentlessly attack others using disingenuous terrorist proxies (Hamas, Hezbollah, Houthis to name a few) that it finances and arms, what has unfolded may not have occurred.

The IRGC has scant little regard for Iranian lives (how many executed for protesting?) let alone useful idiot proxies, such is their ideological hatred of Israel and America. Yes innocents die in war, but neither the USA or Israel deliberately target them, unlike Iran and it's proxies.

But heh, let them develop nuclear weapons. They'd never use them, would they?

15
Ashley owen
May 10, 2026

I don't take sides. I navigate markets.
Cheers. ao

1
James#
May 10, 2026

@Ashley Owen: Always appreciate and value your articles Ashley. Just to be clear, my comment was not regarding your excellent article, but rather a rebuttal of the contextual inanity of John's comment!

4
 

Leave a Comment:

RELATED ARTICLES

Five simple reasons why Australian cash rates are highest

Why an extended US-Iran war will punish mortgage holders

Iran war hands politicians free ticket to blame oil prices for inflation

banner

Most viewed in recent weeks

Why spending more in early retirement can improve lifetime income

Conventional wisdom encourages retirees to preserve superannuation. But if those likely to qualify for the Age Pension later in life spend a little more today, it may deliver higher lifetime income and a more stable retirement.

Testamentary trusts have secured the CGT exemption

Treasury’s latest CGT reform draft delivers a win for testamentary trusts and deceased estates, exempting estate-derived gains from the 30% floor. However, questions on death and divorce rollovers remain unresolved.

Meg on SMSFs: What do we think about reversionary pensions these days?

Reversionary pensions have long been a staple of SMSF estate planning, but are they still the best option? Meg Heffron revisits a once-clear favourite and asks whether changing super rules have shifted the balance.

Is it time to bail on Australian stocks?

For generations, Australian investors have backed banks, miners and dividends. But has that loyalty come at a cost? A look at the numbers raises an uncomfortable question about where future returns will come from.

How does the 4% rule stack up?

The 4% rule has long been retirement's gold standard. But after a difficult period for investors, fresh analysis suggests a more conservative approach may significantly improve the chances of making savings last.

Testamentary trusts survived the trust tax. The drafting battle has just begun.

The fight over testamentary trusts looked settled. Then the draft legislation arrived. Hidden in a technical detail is a question that could force many families to rethink wills they thought were already future-proof.

Latest Updates

Planning

How the typical Australian Family could save $844,350 in taxes

The value of a testamentary trust is not determined by wealth alone. Depending on circumstances, it can reduce the tax burden on inherited income, create efficiencies and help build intergenerational wealth.

Superannuation

There's a reason why your super is locked up until your 60s

For decades, it seemed settled. Then one controversial idea reignited a debate that could reshape the financial future of millions. The real question isn’t who’s right or wrong, but whether a long-held assumption deserves another look.

Property

The housing slide could become a crash

House prices are sliding across Australia, yet the most dangerous ingredient for a housing crash is still missing. If job losses surge amid growing economic risks, today's correction could become a historic property downturn.

Retirement

Under-retiring: The greatest retirement risk in a generation

Two retirees. Similar savings. Completely different lives. New research from Challenger reveals why some Australians confidently spend in retirement while others hold back and the overlooked factor shaping retirement decisions.

Five risks to watch in markets

Things you may often hear are: a recession is around the corner, markets are overpriced, the AI sector is about to flop at any moment. It’s like the never-ending laundry pile that sits in my house, it never really disappears.

Investment strategies

Do you qualify as ‘rich’?

What does it mean to be 'rich'? For something so universally desired, it is surprisingly difficult to define. That ambiguity creates a challenge for investors and raises a bigger question about what financial success really looks like.

Investment strategies

If you’re worried about your bond portfolio, you’re missing the point

Most investors think they know what bonds are for. But when markets turn volatile, a surprising misunderstanding can lead to costly decisions. Here’s the overlooked lesson that could change how you view your portfolio.

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.