September 2026

September 2026 Quarter in Review

The S&P/ASX 200 Index delivered a bumpy ride for investors over the September quarter, finishing 0.12% higher after a steep September sell-off.

While July started strong breaking though 9,000 points driven by Australia’s biggest companies, a toxic mix of stubborn inflation, surging global energy costs (+7.8% in Brent crude), and a tight monetary policy landscape ultimately sapped the market’s momentum.

The defining macro event of the quarter occurred at the Reserve Bank of Australia’s (RBA) September meeting, where the board lifted the official cash rate for a fourth time this year to 4.6% a 15-year high. This move intensified pressure on local businesses and consumers, steering the ASX 200 into a late-quarter correction.

August Corporate Reporting: A “Slow Grind”

The August earnings season was less about blockbuster growth and more about corporate resilience. For portfolio managers, it became a highly selective “stock-picker’s” market. Key themes from reporting season were:

• “Less Bad” Was Good Enough: Many early share price rallies occurred simply because companies met heavily downgraded expectations, rather than because they knocked results out of the park.
• The Margin Squeeze: While revenue held up for top-tier companies, structural cost pressures—specifically soaring energy and diesel expenses—began pinching profit margins. Consequently, many management teams dialled back their financial forecasts for the remainder of the year.
• The Divided Consumer: Companies exposed to non-essential consumer spending reported distinct signs of pain as the RBA’s rate hikes increasingly bit into household budgets. Conversely, defensive and essential service sectors remained highly insulated.

Liquidity Shock Hits Private Credit

For investors seeking yield the Australian private credit sector experienced its most significant structural shake-up in recent memory.

• ASIC Steps In: Following the $3 billion insolvency of commercial property developer Bathla, corporate regulator ASIC issued an urgent warning over questionable internal asset valuations and hidden real estate vulnerabilities within non-bank lending portfolios.
• Fund Freezes and Asset Trims: The friction rolled on in late September when major sector participant Metrics Credit Partners was forced by its auditor to downgrade the valuations of portfolio assets across three of its ASX-listed funds capitalised at $3.63 billion by $171 million (approximately 4.7%) from the net asset valuations.
• Redemptions Gated: In a move to protect capital, Metrics froze withdrawals across two unlisted wholesale funds managing over $9 billion. Additionally, they placed a 90-day pause on creating new client loans and confirmed all distributions will be paid in cash.
• Historical Reliability of Metrics Credit Partners: In navigating past cycles of macro stress, Metrics Credit Partners has historically defended its income-generating mandates by maintaining an uninterrupted track record of monthly distributions. During the severe operational dislocations of the 2020 COVID-19 downturn, and throughout the rapid, unprecedented interest rate tightening cycle of 2022, the manager successfully protected capital and sustained income flow across its key vehicles, including the Metrics Master Income Trust (MXT). While the broader private credit sector has faced recent valuation scrutiny and transient structural liquidity challenges, Metrics emphasizes that no distribution payments have ever been missed since its funds’ inception. This consistent delivery underscores a robust underlying credit underwriting framework designed specifically to isolate corporate and real estate debt structures from public market volatility.

Portfolios in Focus

This quarter’s market action underlines the vital importance of proper asset diversification and
careful risk matching:

• Public Equities: Volatility will likely persist into the next quarter as the market fully processes the 4.6% cash rate environment. Quality, cash-flow-resilient businesses with pricing power remain our preferred equity allocations.
• Specialised Financials: The recent August reporting season highlighted why selective allocation is preferred within the financial services sector. Over a five-year horizon, specialised managers have vastly outpaced the broader S&P/ASX 200 index average earnings per share (EPS) growth of approximately 5.0%, with Pinnacle (PNI) compounding EPS at +28.26%, Qualitas (QAL) at +18.10%, and MA Financial (MAF) at +11.80%. However, these strong track records and robust operational momentum have not spared businesses from the share price volatility of the wider market correction.
• Alternative Income & Private Credit: The recent fund freezes serve as an important reminder that “yield” is closely tied to liquidity risk. While private credit can play a role for wholesale investors seeking premium income, selecting vehicles with robust underlying governance and verifiable valuation transparency is paramount.