Antipodean Advisory · Market wrap

October 2026 market update

By Michael Clapham · 2 November 2026

Market overview

October was a reminder that strong economic activity does not automatically translate into easy investment returns. US growth remained firm, but inflation stayed above target and the Federal Reserve held rates at 3.75%–4.00% while retaining a tightening bias. Higher energy prices and the conflict affecting the Strait of Hormuz added another inflation risk.

Equity markets became more selective. The Nasdaq 100 fell about 6% during October and entered a correction after declining 10% from its 6 October record. Large falls in Alphabet, Amazon and Intel showed that investors are no longer willing to overlook heavy capital expenditure, weaker free cash flow or earnings that fail to meet elevated expectations. The broader S&P 500 held up better, suggesting rotation away from crowded technology positions rather than a uniform exit from equities.

Australia faced its own inflation challenge. Annual trimmed mean inflation was 3.6% in September, above the RBA's forecast, while headline inflation reached 4.3%. The labour market softened and business confidence deteriorated, but persistent services and energy inflation left markets expecting another rate increase at the RBA meeting on Tuesday 3 November.

Global developments

United States – Growth Remains Strong but Inflation Persists

US gross domestic product expanded at a 3.4% annualised rate in the September quarter. Private domestic demand grew by 4.9%, unemployment was 4.2%, and core personal consumption expenditure inflation increased to 3.1%. This combination of above-trend growth, limited labour-market spare capacity and above-target inflation leaves the Federal Reserve with little room to declare victory.

The Federal Reserve kept its target range at 3.75%–4.00% in October. Two members voted for an increase, and markets continued to price a high probability of a December move. Long-term bond yields and tighter financial conditions are already doing some of the work of monetary policy, but a pause is not the same as the end of the tightening cycle.

Artificial Intelligence – The Market Demands a Return on Capital

The AI investment cycle remains powerful, but October exposed the financing and valuation risks. Alphabet reported its second consecutive quarter of negative free cash flow as capital expenditure exceeded operating cash flow. Amazon also experienced a sharp deterioration in free cash flow, while Intel's weak guidance contributed to a 29% one-day fall in its share price.

Microsoft provided the more constructive example: Azure revenue grew strongly and capital expenditure was slightly below market expectations. The contrast is important. Investors are rewarding businesses that can show revenue growth and a credible path from AI spending to sustainable cash flow, while punishing those relying on debt, new equity or distant returns.

Energy and Geopolitical Risk

Conflict in the Middle East and the disruption of the Strait of Hormuz pushed oil-related costs higher. Energy is both a direct household expense and an input into transport, food and production. If elevated prices persist, they will slow the decline in inflation and increase pressure on central banks to keep policy restrictive.

Crypto Assets – Custody and Operational Risk

The reported cyberattack on Binance, involving approximately US$6.3 billion, reinforced that crypto-asset risk extends beyond price volatility. Custody arrangements, operational controls, counterparty exposure and the ability to freeze or recover stolen assets matter. For investors, platform security and legal ownership are as important as the underlying token.

Australian economy

Inflation and Interest Rates

Trimmed mean inflation increased to 3.6% over the year to September, while headline inflation rose to 4.3%. Petrol prices increased 9.4%, but domestic inflation was also evident in services. Services inflation reached 4.1%, showing that the problem cannot be attributed solely to global oil prices.

Markets assigned an 88% probability to a November rate increase to 4.85%. A move of that size would take the cash rate to its highest level in 18 years. A further increase above 5% cannot be ruled out if energy prices stay high or inflation expectations become less anchored.

RBA Meeting – Tuesday 3 November

The November RBA meeting is the immediate focus for Australian households and investors. Market commentary reviewed for this update reported that markets were pricing approximately an 82% chance of a 25-basis-point increase as at Thursday 29 October. Later market reporting placed the probability closer to 88%, illustrating how quickly expectations can move as inflation and energy data change.

A 25-basis-point increase would lift the cash rate from 4.60% to 4.85%. The decision will be released with the quarterly Statement on Monetary Policy, making the accompanying forecasts and language as important as the rate move itself.

Key points to watch include:

• Whether the RBA raises the cash rate to 4.85% or leaves it unchanged while retaining a clear tightening bias.
• Revisions to forecasts for headline and trimmed mean inflation, economic growth and unemployment.
• The RBA's assessment of higher oil prices, fuel costs and other supply pressures following disruption in the Middle East.
• Whether domestic services inflation and inflation expectations are becoming more persistent.
• The extent to which weaker employment, business confidence, housing activity and household spending constrain further increases.

The latest market snapshot reinforces the tension facing the RBA. Brent crude was around US$115.70 a barrel, the Australian dollar was near US$0.7030, and US 10-year Treasury yields had declined to 4.94%. Australian private-sector credit growth was expected to ease to 0.5% in September as higher rates and weaker housing activity slowed borrowing. September-quarter producer prices will provide another indication of whether energy, freight and construction costs are flowing through the supply chain.

For investors, the first reaction may be seen in the Australian dollar, bank shares, listed property, long-duration equities and bond yields. A rate increase would support cash and floating-rate income but increase pressure on leveraged households and businesses. A pause could provide short-term relief, although markets may reverse that response if the RBA signals that inflation requires a later increase.

Households, business and housing

Households remain under pressure. Since December 2021, consumer prices have increased by 21.5%, compared with nominal wage growth of 16.8%. Business confidence fell to minus 13 in September, employment declined by 39,000 and unemployment rose to 4.7%. These indicators point to weakening demand even as inflation remains too high.

Housing has also softened. The supplied October material reports Sydney prices more than 10% below their peak and the national capital-city index down around 8%. Falling property values and tighter credit conditions can reduce household confidence and spending, increasing the risk that further rate rises produce a sharper slowdown.

Fiscal Policy and Productivity

Monetary policy is being asked to restrain inflation while government expenditure remains elevated. Global energy costs are important, but persistent domestic services inflation indicates that Australia also has a local capacity and productivity problem. Fiscal restraint would reduce the burden placed on the RBA and lower the risk that households bear the adjustment through higher mortgage costs.

Australia's weak productivity performance remains the central long-term issue. Sustainable wage growth requires stronger output per worker, more productive private investment, reliable energy, proportionate regulation and disciplined public expenditure. Higher nominal spending without better outcomes does not improve living standards.

Outlook

The outlook remains volatile and selective. Inflation is proving more persistent than central banks expected, energy markets have added a new supply shock, and financial conditions are tightening. At the same time, economic growth and corporate earnings remain resilient in parts of the global market.

Portfolio implications

• Maintain global diversification and avoid relying on one market, sector or investment theme.
• Favour businesses with strong balance sheets, sustainable cash flow, pricing power and reasonable valuations.
• Retain an underweight allocation to Australia while recognising that its resources, financials and offshore earners can provide tactical resilience if global technology weakness continues.
• Maintain floating-rate and quality-credit exposure, with close attention to liquidity and borrower quality.
• Remain cautious on long-duration government bonds while inflation, government borrowing and energy risks keep upward pressure on yields.
• Maintain sufficient cash reserves. Higher deposit and cash-management rates provide useful income and reduce the need to sell growth assets during volatile periods.

Fun fact: The rising cost of the Department of Finance

The Department of Finance helps oversee government expenditure and the management of taxpayers' money. Over five years, its own average staffing rose 50.4%, annual employee costs rose 61.0%, and total departmental expenses rose 161.0%. These increases demand a clear account of the additional results delivered.

Five-year cost comparison

Staffing is the annual average full-time equivalent workforce. Financial figures are actual expenses, rather than approved budgets, and are not adjusted for inflation. Employee and supplier costs form part of total expenses. The final row is a calculated comparison, not an official Finance performance measure. [1, 2]

Comcover insurance claims increased from $651.7 million to $1,821.0 million. Non-financial asset write-downs and impairments increased from $33.8 million to $464.1 million. These explain much of the headline expense increase; excluding both categories at each endpoint, remaining expenses still rose 48.3%. [1, 2]

Head of the department and remuneration

Matt Yannopoulos PSM commenced as Secretary on 29 September 2025, with a five-year appointment. The office carries an annual remuneration package of $932,120, effective 1 July 2026. This is the assigned package, rather than cash base salary alone. He led the department for only part of the comparison period. [3, 4]

Public charter and taxpayer expectations

Finance's stated purpose centres on advice, frameworks and services that achieve value in the management of public resources. Its responsibilities support the efficient, effective, economical and ethical use of public money. [5]

• Expenditure discipline: Rigorous scrutiny of spending proposals, costs and financial risks.
• Reliable budget information: Timely reporting that explains assumptions, revisions and emerging pressures.
• Value for money: Effective procurement and grants frameworks, and responsible management of public assets.
• Financial transparency: Clear disclosure of taxpayer exposure through expenditure, equity investments, loans and guarantees.
• Demonstrated efficiency: Published measures of service quality, realised savings and productivity in Finance's own operations.

Public interest scorecard

Assessment covering 2021–2026. Scores and weights are editorial judgements informed by the evidence cited. They are not official Finance or ANAO ratings.

Weights total 100. Ratings reflect the percentage of available points: below 40% Poor; 40–69% Mixed; 70–89% Good; 90–100% Excellent. The productivity category assesses demonstrated value against rising costs. The score is not an estimate of waste or a measured productivity decline.

Deficit reporting and financing outside the underlying balance

Government equity investments and loans can require borrowing without being counted as ordinary expenditure in the underlying cash deficit. Guarantees create contingent exposure. These arrangements are often outside the underlying cash balance, rather than literally off the balance sheet. The PBO warns against relying on the underlying cash balance alone to assess fiscal health. [8]

The headline cash deficit is more than twice the underlying deficit. The difference includes financing transactions and should not all be described as hidden expenditure. Nevertheless, focusing on the smaller measure understates the overall cash financing requirement. These are full-year Budget forecasts, not year-to-date actuals. [9]

What full financial accountability should show

Finance should prominently reconcile the underlying deficit with the headline cash balance, debt and financial risks. For material equity investments and loans, reporting should explain funding committed, expected returns, valuation changes and potential losses. Transactions outside the underlying deficit still have consequences for taxpayers. The ANAO identifies limited visibility over the increasing use of alternative financing arrangements. [7, 8]

Key conclusion

Accurate reports and timely payments are basic administrative requirements. They do not establish expenditure discipline, sound fiscal management or improved productivity.

An additional 630 full-time equivalent positions, a $103.7 million increase in annual employee costs, and 48.3% growth in expenses excluding insurance claims and asset write-downs demand a clear account of what taxpayers received in return. [1, 2]

Ministers determine spending policy, but Finance remains accountable for its expenditure advice, financial frameworks, risk oversight and administration. Its specific reporting, systems and procurement improvements should be recognised without presenting administrative delivery as proof of overall fiscal control.

The standard should be independently verified savings, transparent fiscal risks and measurable improvements in results—not a larger bureaucracy presented as evidence of better government.

Final thoughts

October reinforced a simple investment principle: growth must eventually convert into cash flow. The AI theme remains significant, but the market is becoming less tolerant of businesses that require continuous capital while offering uncertain or distant returns. Higher interest rates make that discipline more important.

Australia faces a difficult combination of persistent inflation, weak productivity, falling household purchasing power and softer activity. Monetary policy can reduce demand, but it cannot fix energy supply, housing constraints, poor productivity or undisciplined public expenditure. These require structural and fiscal action.

Our response remains to maintain diversification, quality credit, strong balance sheets, sensible valuations and adequate liquidity. We will continue to assess investments by the return available for the risk taken, rather than by the popularity of a theme.

Should you have any questions, please do not hesitate to contact me.

Summary of major share indices

Australian dollar

Government bonds

Market table source: Wall Street Journal. Figures supplied by Antipodean Advisory.

Sources and notes

October market references

• Reserve Bank of Australia – Cash rate target
• RBA – Monetary policy announcement schedule
• ABS – Consumer Price Index, September 2026
• US Federal Reserve – October 2026 FOMC statement
• Binance – Security incident update

Department of Finance references

1. Department of Finance Annual Report 2020–21
2. Department of Finance Annual Report 2025–26
3. Department of Finance – Secretary biography
4. PM&C – Secretaries Instrument of Assignment
5. Department of Finance Corporate Plan 2025–26
6. ANAO – Implementation of Procurement Reforms
7. ANAO – Finance portfolio overview
8. Parliamentary Budget Office – Alternative financing of government policies
9. Department of Finance – September 2026 Monthly Financial Statements

Calculations use unrounded source figures where available; displayed amounts are rounded. Staffing totals are the sum of actual average staffing levels across the three departmental outcomes. The public interest scorecard is an editorial assessment, not an official government or ANAO rating.

This market update was prepared on 2 November 2026, before the RBA's scheduled 3 November decision. Market data and commentary reflect information available at the time of preparation.

Michael Clapham · Antipodean Advisory
Phone: 1300 101 250
Email: mi*****@****************ry.com

General information only. This material does not take into account your personal objectives, financial situation or needs. Consider whether it is appropriate for your circumstances and seek personal advice where needed. Antipodean Private Pty Ltd trading as Antipodean Advisory · AFSL 547263.