Rates, Markets and a Week of Volatility: Lessons for Building a Resilient Portfolio

Last week tested nerves, and the swings haven’t stopped. On Monday 2 November, we learned that Australian home values had fallen for a seventh straight month. On Tuesday, the Reserve Bank lifted the cash rate to its highest level since 2008. On Thursday, Wall Street had its worst day since April 2025, led by a sharp sell-off in artificial intelligence-linked shares. Then, on Monday this week, US shares bounced back sharply as oil prices tumbled.

That’s a lot of whiplash in a very short time. This update sets out what happened, why it matters and, more importantly, what a stretch like this tells us about building portfolios designed to weather changing market conditions.

The scoreboard

Market levels are a snapshot and can change quickly.

• RBA cash rate: 4.85%
  Raised 0.25 percentage points on 3 November to its highest level since 2008.
• S&P 500: Fell 4.4% on Thursday 5 November before rebounding in subsequent trading.
• Nasdaq Composite: Fell 5.5% on Thursday, entering correction territory.
• Brent crude: Settled around US$92.57 a barrel on Monday 9 November after falling around 16% over the previous week.
• Australian home values: Down 1.2% in October and 6.7% from the March peak, according to Cotality.

Markets move daily, so treat these figures as a snapshot, not a final word.

Event one: the RBA hikes again, and says it may not be finished

The Reserve Bank of Australia raised the cash rate by 0.25 percentage points to 4.85%, its fifth increase this year, in a 6–3 split decision. Three Board members preferred to hold the cash rate at 4.60%.

The Bank now expects inflation to remain elevated through much of 2027 and not reach the top of its 2–3% target range until late in the year, around three quarters later than previously forecast. It also pointed to a slowing economy, falling house prices and easing labour market conditions.

Governor Michele Bullock said inflation remains too high and emphasised that the latest tightening is aimed at addressing domestic capacity pressures rather than simply responding to higher global oil prices.

The honest summary is that the path from here remains uncertain. The RBA has already delivered considerable tightening this year, while the full impact of higher rates takes time to flow through households and the broader economy.

For borrowers, it’s another cost on top of a year of increases. For savers, higher rates may continue to support returns available on savings accounts and term deposits, although individual banks will determine what they pass through.

Event two: Wall Street’s AI sell-off, and the snap-back

On Thursday 5 November, the Nasdaq Composite fell 5.5%, its biggest one-day drop since April 2025, while the S&P 500 fell 4.4%. The Dow dropped more than 1,800 points. Nvidia fell more than 9%, with technology and semiconductor stocks among the hardest hit.

There wasn’t one single cause. Concerns about artificial intelligence spending and data-centre development collided with political uncertainty following the US midterm elections and company-specific earnings news. Qualcomm, for example, fell after issuing a weaker-than-expected outlook.

The important point isn’t simply how far markets fell, or how quickly they subsequently bounced. It’s how difficult short-term market movements are to anticipate.

Selling after a sharp fall can crystallise losses and create another difficult decision: when to get back in. At the same time, when a relatively small number of very large companies account for a significant share of an index, investors may have greater exposure to a particular sector or investment theme than they realise.

AI-related businesses may continue to generate strong earnings, but as the past week demonstrated, sentiment can change very quickly.

Event three: oil reverses sharply

Oil was another major source of volatility. Brent crude fell almost 6% on Monday to settle at about US$92.57 a barrel, after US President Donald Trump played down the likelihood of renewed strikes against Iran while diplomatic efforts continued. Brent had already fallen about 16% over the previous week, its steepest weekly decline since the beginning of the COVID-19 pandemic.

That matters well beyond petrol prices. Oil is an important input across transport, manufacturing and other areas of the economy, which means large movements can influence inflation.

But nothing has been settled. Risks around shipping near the Strait of Hormuz remain, and oil prices could move sharply again if geopolitical conditions change.

Closer to home: housing and households remain under pressure

Australian housing continued to soften in October. Cotality’s Home Value Index fell 1.2% nationally, taking values 6.7% below their March peak. The national median dwelling value now sits at approximately $884,855.

The combined capital cities have fallen 8.1% over seven months, although the extent of the decline varies considerably between markets. Brisbane fell 2.0% in October, Perth 1.7%, Sydney 1.6% and Adelaide 1.2%.

Other property indices measure the downturn differently, which is a useful reminder that no single data series tells the whole story. The direction, however, is clear: higher borrowing costs, weaker confidence and serviceability pressures are weighing on housing demand.

What this means for how you invest

Stretches like this are uncomfortable, but they’re also a useful reminder of some of the principles behind long-term portfolio construction.

• Diversification matters. Different asset classes can respond differently to the same economic conditions. Spreading exposure across investments can help reduce reliance on any single market, sector or theme.
• Don’t let one bad day drive a long-term decision. Sharp falls can be followed by equally sudden rebounds. Reacting emotionally to short-term movements can turn temporary market volatility into permanent losses.
• Understand what’s inside your funds. Global index funds and superannuation investment options can hold significant positions in large technology companies. It’s worth understanding your underlying exposure rather than relying solely on a fund’s label.
• Consider your liquidity needs. Particularly in retirement, having sufficient cash or defensive assets for near-term spending can reduce the need to sell growth assets during a market downturn.
• Income-producing assets are worth revisiting. With Australia’s cash rate at 4.85%, the return available from cash and some fixed-income investments is materially different from the ultra-low-rate environment of several years ago.
• Rebalance deliberately. Significant market movements can shift a portfolio away from its intended asset allocation. Reviewing and rebalancing against an established strategy is different from reacting to daily headlines.
• Understand your currency exposure. Movements in the Australian dollar can affect the Australian-dollar value of unhedged international investments, adding another source of movement to overseas portfolio returns.

What we’re watching

• The next RBA meeting: The Monetary Policy Board’s final decision for the year is due on 8 December, with markets watching closely for whether the Bank holds or tightens monetary policy again.
• US inflation and interest rates: Incoming inflation and employment data will continue to shape expectations around the US Federal Reserve.
• Oil and the Middle East: Whether diplomatic efforts progress and whether the recent decline in oil prices holds. Geopolitical and shipping risks remain significant.
• The AI earnings cycle: Whether the recent correction in technology and semiconductor shares proves temporary or becomes more prolonged.
• Australian jobs and housing data: Two important indicators of how households and the economy are absorbing higher interest rates.

The bottom line

Nobody can predict the next headline, and the past fortnight is a good example of why.

But the weeks that unsettle us most can also remind us why a long-term plan, thoughtful diversification and appropriate liquidity matter.

If recent market movements have left you wondering whether your portfolio is positioned the way you thought it was, that’s a worthwhile question to ask, and one we’d be glad to help you explore.

Want a closer look at how your investments are positioned? Get in touch to arrange a free, no-obligation appointment with one of our Wealth Managers.