The 2025-26 financial year was one of shifting expectations. Investors began the year anticipating further interest rate cuts, but persistent inflationary pressures turned that narrative on its head. By year end, the conversation had shifted to whether additional rate hikes are required to bring inflation back to the RBA’s target range of 2-3%.

The ASX200 index was up 2.7% for FY26, modestly below the 10-year annualised return of 5.31% according to S&P data. Technology and healthcare stocks were the biggest drags on performance while materials was a clear standout sector.

Inflation has real consequences for investors. It erodes purchasing power and often leads to higher interest rates. In this environment, investors typically become…