FY26 In Review: Up Thanks To Miners & Dividends

Array
(
    [0] => Array
        (
            [0] => ((RIO))
            [1] => ((BHP))
            [2] => ((CSL))
            [3] => ((COH))
            [4] => ((WTC))
            [5] => ((XRO))
            [6] => ((SEK))
            [7] => ((REA))
            [8] => ((PME))
            [9] => ((JDO))
            [10] => ((MQG))
            [11] => ((A2M))
            [12] => ((260))
            [13] => ((TLX))
            [14] => ((IGO))
            [15] => ((PLS))
            [16] => ((MIN))
            [17] => ((CHC))
            [18] => ((SGP))
            [19] => ((MGR))
        )

    [1] => Array
        (
            [0] => RIO
            [1] => BHP
            [2] => CSL
            [3] => COH
            [4] => WTC
            [5] => XRO
            [6] => SEK
            [7] => REA
            [8] => PME
            [9] => JDO
            [10] => MQG
            [11] => A2M
            [12] => 260
            [13] => TLX
            [14] => IGO
            [15] => PLS
            [16] => MIN
            [17] => CHC
            [18] => SGP
            [19] => MGR
        )

)

This story features CSL LIMITED, and other companies.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

The Resources sector powered the ASX200 higher in FY26, but June featured falling commodity prices and investors rotating into the laggards.

• FY26 delivered a positive return with dividends contributing substantially
• Global AI investment fuelled Resources while Technology lagged on the ASX
• June rotation lifted Consumer Discretionary as commodity prices weakened
• Outside miners, Australian earnings are under pressure, while upgrades dominate internationally
• Earnings, AI infrastructure and interest rates remain key market drivers

By Danielle Ecuyer

Australia’s own AI-proxy underpinned gains for FY26

For all the talk of an AI bubble, FY26 was undeniably a story of artificial intelligence versus the rest.

For Australian investors, domestic market dynamics played out differently from what went on in the US. The bifurcation between AI-proxy winners, think Resources, and potential losers from the new technology, reflected in the SaaSpocalypse sell-off, could not have been sharper.

When the fat lady stopped singing on the 30th of June, the ASX200 had added 0.67% to 8,778.70 in June, delivering a total return of 6.1% for FY26, including dividends.

As also pointed out by Macquarie, FY26 became the first year since FY22 for Australian businesses to enjoy net earnings growth. The year also featured the RBA kicking off a new rate hiking cycle in February.

Since the first 25bps hike, and as the Middle East war reignited inflationary pressures, the RBA hiked another two times to 4.35% — hardly a positive tailwind for the domestic economy.

Looking in the rear-view mirror, Morgan Stanley notes when FY26 earnings expectations were set in August last year, the outlook was for easier monetary policy, an advancing investment cycle and a supportive fiscal backdrop.

That thesis was well and truly thrown out with the baby and the bathwater during the first half of 2026.

The RBA pivoted to a tightening mode in February, while the May Federal Budget made once-in-a-generation changes to the tax treatment for all assets, not just the property sector, around capital gains and negative gearing.

Against this backdrop, a 6.1% total return doesn’t look too shabby, albeit with the added observation that, below the surface, share markets might never before been as polarised between Winners and Losers are they are this time around.

Macquarie highlights a veritable surge in earnings for Resources companies, projected to grow by 42%.

A 59% rally in mining stocks ensued over FY26, with the sector becoming the ASX’s primary proxy for AI exposure. Copper rose 33% over FY26 driven by structural deficit arising from the buildout in AI-related infrastructure as well as the electrification mega-trend.

Lithium hydroxide rose 129% as demand for EVs surged alongside battery storage, spurred on by consumers turning aways from traditional internal combustion engine vehicles in response to the Middle East war and subsequent higher oil and gas prices.

Shares in Rio Tinto ((RIO)) and BHP Group ((BHP)) reached record highs.

Previous year’s sector winners turned laggards in FY26

The Pharma and Biotech sector fell -48%, making it the most painful laggard on the ASX.

Multiple earnings downgrades for index heavyweights CSL ((CSL)) and Cochlear ((COH)) only reinforced the steep downtrend.

Arguably, the healthcare sector globally had been on the nose for much of the past year, a trend that only began to reverse in June.

Technology and online classifieds stocks were also cast aside on fears of AI disruption and displacement.

WiseTech Global ((WTC)) shares copped a -69% shellacking, not helped by adverse media reporting focused on Richard White and a series of mixed messages and profit warnings.

Xero ((XRO)) shares declined -60%, while Seek’s ((SEK)) fell -42% and REA Group ((REA)) shares -41%.

On Ord Minnett’s number crunching, Heathcare suffered from a -36% fall and Information Technology weakened by -37%.

The outperformance of the Resources sector underpinned Value as the clear winner. Growth, as noted by Macquarie, turned into the laggard in FY26, making the Australian experience very ASX-specific compared with AI-driven markets such as the US, Korea and Taiwan.

As detailed by Morgan Stanley Wealth Management (Australia), emerging market equities rose 36.3% in FY26, followed by Japan at 20.4%, the US at 16.3% and Europe at 12.4%.

Before Australian investors feel too peeved by the domestic performance, spare a thought for Chinese investors, with Chinese equities retreating by -9.6% in FY26.

The first half of 2026 saw the S&P500 advance by 9.3%, largely driven by earnings upgrades. In Australia, the opposite is happening with earnings growth underpinned by miners but suffering downgrades elsewhere.

Full-year forecast earnings growth in the US has risen to 23%-25% from 13%-14% in January.

The uplift in US share prices has been underpinned by earnings expansion rather than multiple expansion, with the forward PER slipping around -10% from peak levels to 20 times.

While Resources led earnings growth on the ASX, the US semiconductor industry accounted for around 85% of the year-to-date return in the S&P500, driven by tremendous earnings upgrades on surging AI-related demand.

The PHLX Semiconductor Sector Index rose almost 90% in the June quarter, a trend mirrored across emerging markets including Taiwan and Korea.

Think TSMC, SK Hynix and Samsung Electronics.

A hawkish RBA didn’t stop the big June rotation

While the set-up for FY26 in Australia was undeniably a Resources story, June marked the beginning of a rotation out of the winners and into the laggards.

Despite “sticky” inflation and continued hawkish commentary from the RBA, the ASX200 eked out a 0.67% total return during the month.

Beneath the surface, commodity prices weakened. Morgan Stanley highlighted gold falling -11.7% as the US dollar strengthened, iron ore declining -6.3% and Brent crude retreating -20.9% following the cessation of hostilities between the US and Iran.

Investors dumped resource stocks, led by the gold miners and diversified giants, which detracted -174bps from the overall ASX200 return.

Rotation was the defining theme for June. Consumer Discretionary rallied 11.7%, led by Cyclical Retail up 12.1%, Consumer Services up 11.7% and Durables up 5.2%.

Macquarie views the strength as evidence that some investors are positioning for the RBA to pivot on the interest rate cycle, reflecting growing weakness in the domestic housing sector following the May Budget.

The broker pushes back on that narrative, believing instead the AI investment cycle is supporting both economic growth and inflation, reducing the need for lower interest rates.

The consumer, in Macquarie’s view, is being “crowded out”, to use a Keynesian phrase, by the AI capital expenditure cycle.

Morgan Stanley and UBS have reached similar conclusions.

Morgan Stanley believes the Materials sector’s 51% outperformance relative to the Banks in FY26 is likely to continue.

This broker argues FY27 will be another year of the “capex-over-consumption” thesis, with higher interest rates and the Budget changes continuing to weigh on housing activity and consumer-related earnings.

UBS likewise expects real consumption growth to slow materially over the coming quarters to around 1% year-on-year.

Falling house prices are expected to weigh on household wealth, while the lagged impact of RBA rate hikes and persistent inflation should continue to pressure discretionary spending.

UBS has another 25bps RBA rate hike pencilled in, taking the cash rate to 4.60%, likely in August, before an easing cycle begins but not before the second half of 2027.

Against this backdrop, it is not difficult to understand why some are questioning June’s rally in Consumer Discretionary, which contributed 81bps to index performance, and Financials, which added 57bps, according to Morgan Stanley.

The rotation was also evident in Healthcare, which contributed 65bps, and Consumer Staples, which added 45bps.

Movers, shakers, laggards and losers in June

Looking at the movers and shakers during June, Pro Medicus ((PME)) shares rallied 53.81%, making it the best-performing stock across the ASX200, ASX300 and All-Tech indices.

Whether Judo Capital ((JDO)) becomes a bellwether for earnings downgrades in the financial sector remains to be seen, but the stock slumped -39.74% after management downgraded guidance relating to three loan exposures.

While analysts remain cautious on the outlook for the major banks, diversified financial Macquarie Group ((MQG)) traded above $250 for the first time.

Other former laggards staged impressive recoveries, including a2 Milk ((A2M)), Life360 ((260)) and Telix Pharmaceuticals ((TLX)).

At the other end of the leaderboard, lithium miners IGO Ltd ((IGO)) and PLS Group ((PLS)) fell more than -20% during June, while Mineral Resources ((MIN)) shares declined more than -15%.

The REIT sector rallied 11.63% over the June quarter, having gained 1.7% during June, outperforming the ASX200 by 1.1%.

As UBS points out, Diversified and Retail REITs led the sector, rising 6.2% and 2.1%, respectively, with Charter Hall Group ((CHC)) climbing 13.4% during June and 21.7% across FY26.

Residential exposures continued to lag, with Stockland ((SGP)) shares falling -19.7% and Mirvac ((MGR)) declining -17.9% over FY26.

UBS estimates the sector is trading at around a -7.7% discount to blended net asset value/discounted cash flow valuations, while offering an FY26 distribution yield of 3.4% (sector average).

Looking ahead to FY27

The market multiple remained around 16.6x 12-month forward PER during June. Morgan Stanley reports consensus expects earnings growth of 12.9% across both FY26 and FY27.

Industrials and Financials enjoyed a valuation recovery during June, following a de-rating to 20.2x from 24.3x over the previous 12 months.

Morgan Stanley believes Australia is now entering a “necessary slowdown”. The housing sector and consumers are expected to come under increasing pressure. The upcoming August reporting season should provide further insights into the health of both segments.

While consensus earnings remain elevated, driven largely by Materials in FY26 and expected to broaden in FY27, the broker’s top-down (macro) models suggest earnings growth will ease “materially”, potentially generating ongoing volatility around expectations.

Macquarie’s FOMO Meter finished June at 1.06 after briefly turning negative in March following the outbreak of the Middle East war and the closure of the Strait of Hormuz.

Positioning is becoming increasingly crowded, with active investor exposure already at 99%, the broker notes. A correction would likely favour more defensive sectors, although July has historically been a strong risk-on month for equities.

CommBank’s economists reckon the RBA will remain on hold for the remainder of 2026, but there are risks of further tightening later this year if growth is more resilient and inflation persistent.

In coming years, CBA envisages structural shifts in the Australian economy around data centres, defence, NDIS changes and the renewable transition.

The data centre build out should continue, albeit risks are rising around social license, capacity constraints in the construction sector and energy supply.

ASX100 Best and Worst Performers of the month (in %)

ASX200 Best and Worst Performers of the month (in %)

ASX300 Best and Worst Performers of the month (in %)

ALL-TECH Best and Worst Performers of the month (in %)

All index data are ex dividends. Commodities are in USD.

Australia & NZ

The World

Metals & Minerals

Energy

Readers note: the graphics above include the first four trading sessions of July.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see tables and graphics included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms