Monthly market update

September was a more challenging month for investment markets. Technology companies linked to artificial intelligence continued to perform well, but many other parts of the share market weakened. At the same time, bond yields rose as investors remained concerned about inflation, government borrowing and higher energy prices. When bond yields rise, existing bond prices generally fall, which weighed on fixed income returns during the month.

Share markets were divided

In the United States (US), large technology companies continued to benefit from strong demand for artificial intelligence, data centres and semiconductors. This helped the technology-focused Nasdaq to outperform.

However, the strength was concentrated in a relatively small number of companies. The broader US share market delivered a more subdued result, while smaller companies were particularly affected by higher borrowing costs. Smaller businesses are often more sensitive to interest rates because they tend to rely more heavily on debt and have less access to capital than larger companies.

Australian shares also declined during September as investors responded to higher bond yields and the prospect of interest rates remaining elevated for longer. Interest rate-sensitive areas of the market were among those under the greatest pressure.

Bonds were affected by rising yields

Bond markets also experienced a difficult month. The US 10-year government bond yield rose to around 5.3%, while the 30-year yield reached its highest level since 2002. Higher yields reflect the additional return investors are demanding to compensate for inflation, interest rate and government debt risks. While higher yields reduce the value of existing bonds in the short term, they also allow investors to earn more attractive income from new bond investments. This can improve prospective returns for long term investors. Higher government bond yields also flow through to other borrowing costs. US mortgage rates rose to around 7.3%, placing additional pressure on housing activity and household budgets.

Inflation remained a concern

Inflation remained a key influence on markets, with the conflict in the Middle East contributing to higher oil and energy prices. Central banks continued to balance the need to control inflation against signs of slower economic growth. In the United States, consumer confidence weakened and demand for workers softened, although household spending remained relatively firm.

In Australia, the Reserve Bank increased the cash rate by 0.25 percentage points to 4.60% at the end of September after inflation remained higher than expected. This added to the pressure already being felt by mortgage holders and other borrowers.

Artificial intelligence continued to reshape markets

Artificial intelligence remained one of the most important long-term investment themes. Strong demand for advanced computer chips, cloud services and data-centre capacity continued to support companies involved in building AI infrastructure. Major technology businesses announced further investment in computing capacity, energy supply and new data centres. There were also signs that AI is beginning to affect competition between companies. Some businesses are using AI to improve efficiency, develop new products and strengthen earnings. Others, particularly established software companies, face the risk that new AI-based products may challenge their existing business models.

The scale of spending on AI infrastructure creates significant investment opportunities, but it also carries risks. Building data centres requires large amounts of capital and energy, and companies will ultimately need to generate sufficient revenue to justify this investment. The debate about AI safety also widened during September. Some technology leaders called for greater coordination and safeguards around the most advanced AI systems, while others argued that innovation and safety can progress together. We expect regulation and responsible development to remain important considerations as the technology evolves.

September’s market movements had different effects across the investments held in NGS Super portfolios. Higher bond yields were a short-term headwind for fixed income investments and for companies that are particularly sensitive to interest rates. Weakness across the broader share market also affected some Australian and international share investments.

At the same time, continued strength among leading technology and AI-related companies supported parts of the international share portfolio. Commodities and other diversifying investments also respond differently to changes in inflation, interest rates and geopolitical conditions.

This highlights the importance of diversification. Rather than relying on one market, company or investment theme, NGS portfolios invest across different asset classes, industries and regions. The objective is to provide members with access to long-term growth opportunities while reducing the impact of weakness in any single part of the market.

Investing across the AI ecosystem

NGS continues to believe that AI has the potential to create substantial long-term economic value. However, its development is unlikely to follow a straight line, and not every company attracting investment today will ultimately succeed.

Our exposure is therefore spread across different parts of the AI ecosystem. This includes companies developing AI models and applications, manufacturers of semiconductors and critical components, providers of computing and data-centre infrastructure, and businesses applying AI to solve real-world problems.

This broader approach allows members to participate in AI’s long-term growth potential without relying entirely on a small group of highly valued technology companies.

How NGS Super manages changing markets

Periods of market uncertainty are a normal part of long-term investing. NGS invests across shares, bonds, infrastructure, property, private markets, commodities and other diversifying strategies. Each investment plays a different role in balancing growth, income and risk within the portfolio.

We continue to assess how persistent inflation, higher interest rates and geopolitical risks could affect markets. Where appropriate, we may use hedging strategies to help reduce the impact of significant market falls. These strategies cannot remove investment risk, but they can help make portfolios more resilient during periods of heightened volatility.

Looking ahead

Markets enter the final months of 2026 facing a mix of opportunities and risks. Higher energy prices and inflation could keep interest rates elevated, while rising government bond yields may continue to place pressure on highly valued companies and heavily indebted businesses. Geopolitical developments are also likely to contribute to periods of volatility.

At the same time, economic growth remains positive and investment in AI, technology and infrastructure continues to create new opportunities. The key question is whether the benefits of AI investment broaden from a relatively small number of technology companies, to businesses and industries across the wider economy. NGS remains focused on building diversified portfolios that can participate in long-term growth while managing shorter-term risks. Investment returns will vary from month to month, but super is a long-term investment, and our portfolio decisions remain guided by members’ long-term retirement outcomes.

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This information is general information only and does not take into account your objectives, financial situation or needs. Before acting on this information, or making an investment decision, consider whether it is appropriate to you and read our Financial Services Guide, Product Disclosure Statements and Target Market Determinations. You should also consider obtaining financial, taxation and/or legal advice tailored to your personal circumstances before making a decision. Financial products are issued by NGS Super Pty Ltd AFSL 233 154.