Headline CPI rose more than expected, from 2.8% to 3% prompting analysts to push back forecasts for further rate cuts until November or early 2026. Core inflation fell slightly to 2.6%, edging closer to the RBA’s target band, but price pressures persist in housing and services.
GDP grew 0.6% in the June quarter, driven by a rebound in consumer spending and solid wage growth. The unemployment rate held steady at 4.2%.
Despite cautious consumer sentiment – the Westpac-Melbourne Institute Consumer Sentiment Index fell 3.1% in September – business confidence remains upbeat, particularly in retail and manufacturing.
Despite the August/September period noted for being seasonally weak, markets remain at near record levels. The ASX 200 was supported by strong performance in banking and mining stocks. US equities, meanwhile, continue to push higher off the back of the AI boom and anticipation of rate cuts.
Commodity prices and risk appetite helped the Australian dollar touch an 11- month high before easing slightly.
Keeping your cool when the markets heat up
Investing isn’t just a numbers game. It’s an activity that stirs various emotions from hope and optimism to fear and anxiety.
Whether the ASX is surging or stumbling, emotional responses to market movements can shape outcomes just as much as economic fundamentals. Understanding those responses is crucial to building resilience, especially in unpredictable times.
These patterns underscore the importance of long-term perspective, especially in a market shaped by both global sentiment and uniquely local factors.
How emotions enter the equation
We like to think our financial decisions are rational, but the truth is more complex. Investors aren’t robots crunching numbers in isolation. We are influenced by news cycles, cultural values and personal stories from friends, family and colleagues.
When markets rise, euphoria and FOMO can drive hasty buying decisions. During downturns, anxiety and regret can push investors to sell at a loss, despite having sound long-term strategies.
This pattern has played out across decades, from the dot-com bubble to the COVID recovery. And remember that emotional investing isn’t just a beginner’s problem. Even seasoned investors can be swept up by sentiment if safeguards aren’t in place.
Psychologists have long observed how financial stress activates similar responses to physical threats, triggering fight-or-flight instincts rather than thoughtful analysis. That’s why even well-informed investors may react defensively when facing market instability.
The good, the bad and the balancing act
Emotional investing isn’t all risk. In the right conditions, it reflects conviction, clarity and purpose. For example, values like patience and belief in the future can help investors stay committed during market dips.
Life changes such as home ownership, welcoming a child or retirement can bring useful emotional clarity to financial decisions. And ethical investing often stems from emotions such as care and connection to community.
When used with discipline, emotions can reinforce sound decisions rather than undermine them. Investors who use emotional clarity to establish long-term goals tend to feel more confident, even when short-term volatility strikes.
That said, emotions can also derail strategy. Panic selling during downturns, overconfidence after gains and herd mentality all pose risks.
The 2022 market correction saw many Australians pull out of super investments prematurely, missing the rebound that followed. These reactions stem not just from fear but also from a desire to act, even when patience may be more effective.
Learning from behavioural finance
Behavioural finance gives us tools to interpret emotional reactions. Biases like loss aversion, recency bias and anchoring affect decision-making in subtle but powerful ways.
These include:
- Loss aversion – People often feel the sting of losses more intensely than the joy of equivalent gains, which can lead to overly cautious or reactive choices.
- Recency bias – Recent events weigh heavily on perceptions, leading investors to expect trends will continue simply because they’ve just occurred.
- Anchoring – Fixating on a past portfolio value or arbitrary benchmark can skew rational assessment.
Recognising these tendencies helps investors avoid knee-jerk decisions and design portfolios that stay aligned with goals over time. It’s not about eliminating emotion; it’s about becoming aware of how it operates and mitigating its effects through smart responses.
After all, markets are always shifting. Emotions will always emerge. The goal isn’t to shut them out, but to understand them and develop structures to keep emotions from steering the ship. When investors learn to pause, reflect and act with intent, they not only improve outcomes but feel more confident in their journey.
If you’d like to explore strategies to build emotional resilience in your portfolio, or tools to help remove bias from investment decisions, please give us a call.
Navigating turbulent times in the share market
As investors grapple with uncertainty, keeping a cool head has never been more important.
“Time in the market, not timing the market” is a popular investment philosophy that emphasises the importance of staying invested over the long term rather than trying to predict short-term market movements. While markets can be volatile in the short term, historically, they tend to grow over time.
It’s a strategy that helps you avoid getting caught up in short-term market fluctuations or trying to predict where the market is heading.
With the recent market turbulence, from the global effects of US President Donald Trump’s administration to ongoing conflicts in Ukraine and the Middle East, savvy investors look beyond the immediate chaos to focus on strategies that encourage stability and growth over the long-term.
It’s a hallmark of the approach by the world’s most high-profile investor, Warren Buffet, who argues that short-term volatility is just background noise.
“I know what markets are going to do over a long period of time, they’re going to go up,” says Buffet.i
“But in terms of what’s going to happen in a day or a week or a month, or even a year …I’ve never felt it was important,” he says.
Buffet first invested in the sharemarket when he was 11 years old. It was April 1942, just four months after the devastating and deadly attack on Pearl Harbour that caused panic on Wall Street. But he wasn’t fazed by the uncertain times.
Today Buffet is worth an estimated US$147 billion.ii
Long-term growth in Australia
While growth has been higher in the US, investors in Australian shares over the long-term have also fared well. For example, $10,000 invested 30 years ago in a basket of shares that mirrored the All Ordinaries Index would be worth more than $135,000 today (assuming any dividends were reinvested).iii
And it’s not just the All Ords. If that $10,000 investment was instead made in Australian listed property, it would be worth almost $95,000 today or in bonds, it would be worth almost $52,000.
In real estate, the average house price in Australia 30 years ago was under $200,000. Today it is just over $1 milllion.iv
Meanwhile, cash may well be a safe haven and handy for quick access but it is not going to significantly boost wealth. For example, $10,000 invested in cash 30 years ago would be worth just $34,000 today.v
Diversify to manage risk
Diversifying your investment portfolio helps to manage the risks of market fluctuations. When one investment sector or group of sectors is in the doldrums, other markets might be firing therefore reducing the chance that a downturn in one area will wipe out your entire portfolio.
For example, the Australian listed property sector was the best performer in 2024, adding 24.6 per cent for the year. But just two years earlier, it was the worst performer, losing 12.3 per cent.vi
Short-term investments – including government bonds, high interest savings accounts and term deposits – can play an important role in diversifying the risks and gains in an investment portfolio and are great for adding stability and liquidity to a portfolio.
Ongoing investment strategies
Taking a long-term view to accumulating wealth is far from a set-and-forget approach and by staying invested, you give your investments the best chance to grow, avoiding the risks of missing out on key growth periods by trying to time your buy and sell decisions perfectly.
Reviewing your investments regularly helps to keep on top of any emerging economic and political trends that may affect your portfolio. While it’s important to stay informed about market trends, it is equally important not to overreact when there is volatility in the share market.
Emotional investing can lead to poor decisions, so remember the goal is not to avoid market declines but to remain focussed on your overall long-term investment strategy.
Please get in touch with us if you’d like to discuss your investment
i Warren Buffett: The Truth About Stock Investing
ii Bloomberg Billionaires Index – Warren Buffett
iii, v, vi Vanguard Index Chart | Vanguard Australia Personal Investor