RBA Rate Signals: What Rising Rates Mean for Your Portfolio
In response, the RBA raised the cash rate by 25 basis points to 3.85%, reinforcing its commitment to returning inflation to target within a reasonable timeframe. Updated forecasts point to a slower disinflation process, with both headline and underlying inflation expected to remain above the 2–3% target band over the near term.
This shift has prompted a recalibration across financial markets. Expectations that had begun to tilt toward eventual rate cuts have been replaced with a more cautious “higher for longer” stance. Bond yields have adjusted, equity market leadership has narrowed, and interest rate-sensitive sectors are once again under pressure. For investors, the change carries immediate implications for asset valuations, sector performance, and portfolio positioning.
Reading Between the Lines of RBA Guidance
While the RBA has stopped short of explicitly signalling an extended hiking cycle, its recent commentary reflects a clear tightening bias. The Board emphasised that inflation remains above target, with risks skewed to the upside amid strong domestic demand and tight labour market conditions.
Economy-wide capacity pressures have increased, suggesting that demand may be running ahead of supply. Both headline and trimmed-mean inflation in the December quarter came in higher than forecast, with the share of CPI items rising above 2.5% increasing sharply by historical standards. Trimmed mean inflation is projected to peak at 3.7% in mid-2026, while headline CPI is expected to reach around 4.2%, partly influenced by the ending of electricity rebates. This dynamic complicates disinflation and increases the likelihood that restrictive policy settings will persist.
The labour market remains central. Low unemployment and resilient wage growth support household incomes but contribute to persistent services inflation. Unit labour costs remain elevated, reflecting tight conditions, while business investment, particularly in data centres, has surged. The RBA faces a delicate balancing act: tightening sufficiently to contain inflation without unnecessarily destabilising growth.
For investors, the hurdle for rate cuts has risen. Policy is now firmly data-dependent, with a bias toward further tightening should inflation fail to moderate. Eased financial conditions, rising housing credit, and strong business debt growth reinforce the Board’s view that policy must remain restrictive. Australia’s domestic inflation challenges diverge from the more accommodative paths signalled by peers such as the US Federal Reserve and the European Central Bank, highlighting the unique domestic context.
How Rising Rates Move Markets
Rate hikes do not affect all assets equally. Understanding how rising rates flow through markets is key for portfolio positioning.
At a fundamental level, higher rates increase the discount rate applied to future cash flows. This reduces the present value of long-duration assets, most acutely impacting growth stocks where expected returns lie several years ahead. Companies projecting earnings five to ten years out are more sensitive than those generating strong cash flows today.
Capital-intensive sectors and companies with high leverage face direct pressure as borrowing costs rise and profit margins tighten. Consumer discretionary businesses are doubly exposed: higher financing costs for operations combine with households contending with rising mortgage repayments and living costs, dampening demand.
Certain sectors historically benefit in a rising-rate environment. Banks and financial institutions often see net interest margin expansion, while energy and resources stocks, less sensitive to domestic rates and more influenced by global commodity prices, can hold up. The RBA noted that global growth, particularly in East Asia and the US, has remained resilient, supporting commodity prices and providing a tailwind for Australian resources.
On the ASX, equity prices had already underperformed other major markets before February’s decision, reflecting expectations of rising rates that were progressively priced in. The key uncertainty now is not the recent hike, but how many more may follow and whether the RBA can balance cooling inflation without triggering a material slowdown in growth.
Portfolio Implications
Equities: Earnings Over Expansion
In a higher-rate environment, equity returns are increasingly driven by earnings rather than multiple expansion. Growth stocks with long-duration earnings profiles are particularly sensitive, as higher discount rates reduce the present value of future cash flows. Companies with strong pricing power, consistent cash flow generation, and robust balance sheets are better positioned to navigate elevated costs and softer consumer demand. Defensive sectors such as healthcare, consumer staples, and infrastructure may offer more stable cash flows, while financials could benefit from wider lending margins if credit quality remains resilient.
Fixed Income: Income Re-emerges
Rising yields have restored fixed income as a meaningful source of portfolio income. Government and investment-grade bonds now offer attractive yields, improving the risk-return trade-off. Duration risk remains relevant, with longer-dated bonds facing price volatility if policy tightens further or remains restrictive. Strategies that actively manage duration, incorporate floating-rate notes, or diversify across maturities and credit profiles can help mitigate risk while capturing higher income.
Property and REITs: A Selective Market
Property remains highly sensitive to rates. Leveraged REITs and property investments face pressure from rising borrowing costs, refinancing challenges, and cap rate expansion. High-quality assets in supply-constrained segments may prove more resilient than secondary or cyclical properties with weaker demand. Investors should prioritise asset quality, tenant stability, and structural market advantages.
Consumer and Cyclical Sectors: Margin Pressures
Elevated interest rates weigh on household budgets, reducing discretionary spending. Companies in consumer discretionary or cyclical sectors may face margin compression if cost increases cannot be passed through. Businesses with pricing power, operational efficiency, or exposure to non-discretionary demand are better positioned to navigate this environment.
Cash and Liquidity: Reconsidered
Cash and term deposits are now a competitive component of a diversified portfolio, offering meaningful yield while preserving capital. Maintaining liquidity provides flexibility to respond to market volatility or opportunistic investments, particularly if rate volatility continues.
Where We See Opportunity
Higher-rate environments are not uniformly hostile to investors; they are hostile to the wrong positioning. That distinction creates opportunities for those willing to be precise.
Within equities, we favour businesses with three core attributes: strong free cash flow, low financial leverage, and demonstrated pricing power. These qualities allow companies to navigate higher costs, service debt without distress, and preserve margins even as consumer budgets tighten. On the ASX, this points us toward quality names in financials, healthcare, infrastructure, and select resources — sectors where earnings are underpinned by structural demand rather than cyclical optimism. Periods of macro-driven volatility can create mispricing, allowing long-term investors to accumulate high-quality assets at attractive entry points.
Fixed income now deserves a genuine allocation. The yields available in shorter-duration, investment-grade bonds provide a meaningful income base that was largely absent two years ago. Inflation-linked securities add further protection in an environment where the RBA’s own forecasts anticipate above-target inflation persisting well into 2027.
Selectivity remains critical. Broad market exposure may be less effective than targeted positioning aligned with prevailing macro conditions. Investors should focus on businesses with resilient earnings, strong balance sheets, and exposure to non-discretionary demand, while diversifying across sectors, geographies, and asset classes to mitigate risk and capture upside.
Key Risks to Monitor
While the RBA remains focused on containing inflation, risks remain on both sides of the policy outlook. Overtightening could slow consumption or employment more sharply than expected, while persistent inflation may require further tightening, increasing the risk of a more pronounced economic slowdown.
External factors such as global growth volatility, particularly in China, or commodity price swings, could influence the domestic outlook. Taken together, the most likely scenario is that interest rates remain elevated for an extended period rather than moving sharply in either direction. Portfolios should therefore be designed to be resilient and flexible across a range of potential outcomes.
Navigating a Higher-for-Longer Environment
Rate uncertainty has reshaped the investment environment. Investors must now contend with the likelihood of persistent restrictive settings. Portfolio construction should prioritise quality, resilience, and diversification across equities, fixed income, property, and cash.
From a valuation perspective, higher rates and persistent inflation alter asset attractiveness. Equities with predictable earnings, strong cash flow, and low leverage are likely to outperform, while long-duration growth stocks remain sensitive to higher discount rates. Fixed income offers meaningful income, particularly via short-duration and inflation-linked instruments. High-quality property and REIT exposures in structurally advantaged segments may also hold value, while excessive leverage or secondary assets remain vulnerable.
Strategically, selectivity and flexibility are paramount. Portfolios should be robust to uncertainty rather than reliant on precise interest rate timing. Maintaining liquidity and monitoring macro signals allows investors to respond to market dislocations and mispricing opportunities. A disciplined, forward-looking approach enables capture of opportunities where valuations reflect fundamentals while managing downside risks.
By integrating these considerations, investors can navigate the current cycle with a balanced approach, aligning portfolio positioning with market realities and maintaining resilience while pursuing selective upside in a prolonged high-rate, high-inflation environment.
Whether you want to review your holdings or receive strategic guidance on navigating a higher-for-longer rate environment, we encourage you to
speak with an adviser. Thoughtful positioning decisions today can have meaningful implications for outcomes over the years ahead.
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Disclaimer: This article does not constitute financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.
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About Amazon.com Inc Amazon.com, Inc. engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, fire tablets, fire TVs, echo, ring, blink, and eero; and develops and produces media content. In addition, the company offers programs that enable sellers to sell their products in its stores; and programs that allow authors, independent publishers, musicians, filmmakers, Twitch streamers, skill and app developers, and others to publish and sell content. Further, it provides compute, storage, Artificial intelligence, database, analytics, machine learning, and other services, as well as advertising services through programs, such as sponsored ads, display, and video advertising. Additionally, the company offers Amazon Prime, a membership program. The company's products offered through its stores include merchandise and content purchased for resale and products offered by third-party sellers. It serves consumers, sellers, developers, enterprises, content creators, advertisers, and employees. The company was incorporated in 1994 and is headquartered in Seattle, Washington. Source:EODHD Key Stats
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Borrowing capital to invest remains the most effective tool available to sophisticated investors seeking to accelerate portfolio growth, yet it is often misunderstood as a "high-stakes gamble." Leverage amplifies your purchasing power, transforming a standard portfolio into a dynamic engine for wealth creation. While the concept of "risk-free" leverage is a mathematical impossibility, the ability to manage risk with institutional-grade precision is entirely achievable. Smart investors do not fear debt because they understand how to structure it as a calculated business strategy rather than a speculative bet. They respect the mechanics of gearing and employ professional oversight to mitigate the downside while capturing the upside of global markets. In 2026, the question isn't just about whether you should use leverage, but how you manage the journey from research to results. By moving away from "set-and-forget" retail habits and adopting an evidence-based framework, you can replace the anxiety of the unknown with the confidence of a professional strategy. How does margin lending work? Margin lending is a strategic tool that allows you to borrow capital to invest in approved shares, using your existing portfolio or cash as security. This creates a Loan-to-Value Ratio (LVR), which dictates your borrowing capacity against specific assets. While the lender holds security over the portfolio, the investor retains beneficial ownership and receives all dividends and franking credits. The mathematics of leverage are compelling when executed with professional-grade research and risk management. Consider a share-specific example: Initial Equity : You start with $100,000 in cash or existing blue-chip shares. The Leverage : You borrow an additional $100,000 to increase your total market exposure to $200,000. 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This mechanism protects the lender but can devastate an unmanaged, "set-and-forget" portfolio. This fear typically stems from a lack of active, professional portfolio management. When you rely on a passive strategy while holding debt, you surrender control to market forces exactly when you need discipline and data-led execution the most. The Sharewise approach to mitigating risk: Proactive market monitoring : Our Chief Investment Officer looks at 5,000 stocks across all markets every day, ensuring we identify shifts before they become critical threats to your LVR. Data-driven discipline : We utilise technical and fundamental analysis to remove emotional "hope" from the equation, implementing strict protocols to protect your capital. Constant communication : Every investor has a dedicated advisor providing one-on-one communication, ensuring you are never left guessing during market corrections. Absolute transparency : Through our managed account structure, you can log in 24/7 to see exactly how your portfolio and leverage are performing, maintaining control with confidence. What is margin lending vs margin loan? Choosing the right debt structure for growth means moving beyond a basic comparison of loan types to understanding exactly how your facility is managed. While these terms are often used interchangeably in financial headlines, there is a strategic difference that every professional investor should recognise. Margin lending refers to the broader program or strategy of borrowing against securities to amplify your investment capacity. In contrast, a margin loan is the specific debt instrument or credit facility you use to execute that strategy. Understanding this distinction is vital for managing your LVR and maintaining absolute control over your financial future. Margin Lending (The Strategy): This is the overarching framework of borrowing to invest, technically known as "gearing". It requires institutional-grade research and constant vigilance to ensure your leverage supports growth without creating unmanaged risk. Margin Loan (The Product): This is the actual line of credit that carries the interest rate. When you are searching for the best margin lending rates, you are effectively comparing the cost of different margin loan facilities against the potential performance of your shares. By focusing on the margin lending strategy as a whole, rather than just the margin loan balance, you ensure your borrowing is supported by proactive market monitoring rather than just passive debt. Why margin lending outperforms generic debt When seeking to accelerate wealth, the choice of borrowing is just as critical as the choice of shares themselves. While many investors consider standard debt products, margin lending is specifically engineered for the equity market, offering a level of institutional-grade precision that generic borrowing cannot match. Choosing margin lending over other vessels of borrowing is a strategic decision for the serious investor. While personal loans or bank overdrafts can technically be used to buy shares, they are "blunt instruments" not designed for market dynamics. Risk Mitigation: Personal loans and overdrafts have no built-in LVR monitoring. Margin lending, when paired with professional portfolio management, includes daily oversight to ensure market dips don't become financial disasters. Tax Efficiency: In Australia, interest on a margin loan used to acquire income-producing shares is generally tax-deductible. While other loans can be deductible if used solely for investing, the administrative burden of "tracing" those funds is complex compared to a purpose-built margin lending facility. Cost of Capital: Because margin lending is secured against a liquid share portfolio, lenders often provide the best margin lending rates, whereas personal loans are unsecured and carry significantly higher interest costs that can eat into your investment performance. Cash Flow & Liquidity: An overdraft often requires rigid repayment schedules. Margin lending offers the flexibility to pay interest from dividends or capitalise it into the loan, allowing your share portfolio to compound more efficiently. Securing the best margin lending rates is only the first step; the real value lies in the active management of those funds. By moving away from "passive debt" and embracing a managed account structure, you transform a simple loan into a sophisticated utility for market outperformance. The path to risk-aware leverage While no investment is devoid of risk, the fundamental difference between reckless gambling and strategic gearing lies in the professional management framework. Securing the best margin lending rates is only the first step; the real value lies in the active management of those funds to ensure your share portfolio consistently outperforms the cost of debt. Professional advisors and investment managers utilise managed accounts to monitor LVR levels daily. This vigilance ensures that minor market dips are addressed before they become critical margin calls, providing professional portfolio management without losing control. The historical data supports a strategic approach; while Australian shares have delivered strong long-term averages, the real "profit margin" for the investor is the spread between the cost of debt and the potential return. Because interest on investment loans is generally tax-deductible for Australian residents, the real cost of holding a leveraged position is significantly lower than the headline rate. 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About CAR Group Limited. CAR Group Limited engages in the online vehicle marketplace business in Australia, New Zealand, Brazil, South Korea, Malaysia, Indonesia, Thailand, Chile, China, and North America. The company operates through six segments: Australia " Online Advertising Services; Australia " Data, Research and Services; Investments; North America; Latin America; and Asia segments. It offers classified advertising that allows private and dealer customers to advertise automotive and non-automotive goods and services for sale across the carsales network; products, including subscriptions, lead fees, listing fees, and priority placement services; and display advertising services, such as placing advertisements for corporate customers comprising automotive manufacturers and finance companies. The company also provides software as a service, research and reporting, valuation, appraisals, and website development and hosting services, as well as photography services. In addition, it offers vehicle inspection services; operates digital automotive and non-automotive marketplaces; and offers automotive data and advertising services. The company was formerly known as carsales.com Ltd and changed its name to CAR Group Limited in November 2023. CAR Group Limited was incorporated in 1996 and is headquartered in Melbourne, Australia. Source: EODHD Key Stats
About Northern Star Resources Ltd. Northern Star Resources Limited engages in the exploration, development, mining, and processing of gold deposits. The company also sells refined gold. It operates in Western Australia, the Northern Territory, and Alaska. Northern Star Resources Limited was incorporated in 2000 and is headquartered in Subiaco, Australia. Source:EODHD Key Stats
About Meta Platforms Inc Meta Platforms, Inc. engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality (VR) headsets, and AI glasses in the United States, Canada, Europe, Asia-Pacific, and internationally. It operates through two segments, Family of Apps (FoA) and Reality Labs (RL). The FoA segment offers Facebook, which enables people to build community through feed, reels, stories, groups, marketplace, and other; Instagram that brings people closer through Instagram feed, stories, reels, live, and messaging; Messenger, a messaging application for people to connect with friends, family, communities, and businesses across platforms and devices through text, audio, and video calls; Meta AI, an assistant that's available across apps, as a stand-alone app, on AI glasses, and on the web; Threads, an application for text-based updates and public conversations; and WhatsApp, a messaging application that is used by people and businesses to communicate and transact in a private way. The RL segment provides virtual and augmented reality products, including consumer hardware, software, and content that help people feel connected anytime and anywhere, as well as Meta Quest devices that enable social experiences across gaming, fitness, entertainment, and more. The segment also includes wearables such as AI glasses like Ray Ban Meta and Oakley Meta glasses, featuring Meta AI for advanced conversational and hands free interaction; and the Meta Ray Ban Display, which combines AI glasses with an integrated lens display and the Meta Neural Band, a wrist worn device using electromyography that lets people control their AI glasses through neuromuscular signals. The company was formerly known as Facebook, Inc. and changed its name to Meta Platforms, Inc. in October 2021. The company was incorporated in 2004 and is headquartered in Menlo Park, California. Source:EODHD Key Stats
