Markets enter September with share indices near record highs, but several important things are shifting beneath the surface. Oil is pushing against a ceiling that has capped it for nearly two decades, while gas and coal prices are surging into the Northern winter. Long-term government bond yields – the interest rate that anchors the price of every other asset – are breaking out to new cycle highs. We are entering the market’s historically weakest month, with US midterm elections due in early November. And the extraordinary boom in artificial intelligence spending, which has been carrying the US economy and share market, is starting to attract harder questions about how it is being funded.
None of this is cause for alarm. It is cause for balance – and it reinforces why we hold what we hold: quality companies with strong balance sheets, and real assets such as gold, energy and other commodities that tend to do well when inflation and interest rates stay higher for longer.
1. Oil is knocking on a 20-year ceiling
The chart below shows crude oil by quarter, going back to the 1950s. Since 2008, every rally – 2010, 2014, 2022 – has failed at roughly the same level around US$100–105 a barrel. Oil, now in the mid-US$80s, is pressing up against that ceiling again. Long ceilings like this matter: the longer a level holds, the more significant the eventual break tends to be.
Oil hasn’t broken through yet, but the broader commodity complex already has – the Bloomberg Commodity Index has broken above a downtrend channel that contained it for 16 years, and oil only joined that advance in March. Supply disruption in the Middle East, years of under-investment in new production, and the sheer electricity demand of the AI build-out all point the same way.
Figure 1: Crude oil (WTI), quarterly, 1955–2026 – every rally since 2008 has stalled at the same long-term ceiling
Source: TradingView
2. Gas and coal: the winter squeeze
The pressure is even more visible in gas. The European benchmark (Dutch TTF) has traded up through €74–75 per megawatt-hour this week – its highest level in more than three and a half years and roughly 135% above where it stood a year ago – as disruption around the Strait of Hormuz curtails LNG flows. Asian LNG prices have followed to around US$23/MMBtu, meaning European and Asian buyers are now bidding against each other for cargoes. Crucially, European gas storage is lower than it should be at this point of the year, so prices look set to stay elevated, and the risk skews higher, into the Northern winter.
These prices flow through to the earnings of Santos, Woodside and Origin with a lag – oil-linked contract pricing typically takes three to six months to catch up, while the spot-exposed portion of cargoes captures today’s prices almost immediately. Expensive gas also pushes power generators back toward coal: Newcastle thermal coal has hit a two-year high of about US$150 a tonne. Separately, coking coal has gapped higher to around US$279 a tonne on Chinese supply constraints – supportive for Whitehaven, which has exposure to both.
3. The energy transition: realism over rhetoric
Stepping back, there is a structural reason we expect energy and materials prices to stay stronger for longer than consensus assumes. The chart below, drawn from International Energy Agency data, shows China’s energy mix over five decades. Despite building more solar and wind capacity than the rest of the world combined, fossil fuels still supply 86.3% of China’s primary energy – a higher share than in 1971 – while solar and wind together supply just 3.8%. The reason is simple arithmetic: total energy demand has grown faster than renewables can be added. This is not an argument about climate policy; it is an observation about physics and scale.
Figure 2: China’s primary energy mix, 1971–2024
Source: International Energy Agency world energy balance, 2026 update.
The constraint tightens from here. Any acceleration of the transition requires staggering quantities of copper, aluminium, silver and dozens of other materials – and the IEA’s own critical-minerals analysis shows planned mine supply falling well short of what those pathways assume. Many net-zero scenarios also lean on carbon-capture technology deployed at a scale that does not yet exist. Whichever way this resolves, the investment conclusion is the same: demand for oil, gas, coal and uranium persists far longer than the models assume, and the metals needed for any build-out face structural supply deficits. Hard assets are on the right side of both outcomes.
4. Long-term bond yields – the quiet breakout
The most important price in the world is arguably the long-term government bond yield: it is the benchmark against which shares, property and every other asset are valued. After three years of moving sideways, long-dated yields have now broken decisively higher – the US 10-year sits around 4.7% and the 30-year above 5.2%, and the breakout pattern suggests the move is not finished.
Figure 3: Long-term government bond yields, weekly, 2021–2026 – a three-year consolidation has resolved to the upside
Source: TradingView
Why are yields rising? In short, supply and arithmetic. The US government now owes over US$40 trillion, and its interest bill plus age-related spending is growing faster than its tax receipts. Veteran investor Stan Druckenmiller put it bluntly in the Wall Street Journal last week: the long-term bond yield is the only fiscal disciplinarian the US has left. Notably, yields rose even after the Federal Reserve chair delivered a hawkish, inflation-fighting message at Jackson Hole – the bond market is increasingly pricing the debt, not the Fed.
5. September and the midterms: expect chop, not catastrophe
September is, on average, the weakest month of the year for shares – the only month with a negative average return since 1950, and the only one that finishes higher less than half the time. This year the calendar adds a second layer: US midterm elections on 3 November. Midterm years are historically the most volatile of the four-year presidential cycle, with an average peak-to-trough fall of around 18%, and the low most often arriving in September or October as election uncertainty peaks.
We approach it in two layers. The first is conviction on the highest scorers, led by the big miners. This is not narrative: BHP's AI-driven plant control has saved 3 billion litres of water and 118GWh of energy at Escondida since FY22, and around 90% of Rio Tinto's Pilbara haul fleet is autonomous. These are proprietary datasets and workflows smaller peers can't replicate, and the theme also underpins demand for the copper, lithium and rare earths producers further down the curve.
Figure 4: S&P 500 average monthly return since 1950 – September is the standout laggard
Source: Market data since 1950 (approximate).
6. The AI spending boom: how sustainable is it?
AI is a genuine technological revolution – but the sums being spent on it are now so large they have macroeconomic consequences. Recent Financial Times analysis shows that essentially all of the growth in US business investment this year is coming from the AI build-out; strip it out and investment is going backwards. Industry estimates (SemiAnalysis) put total data-centre capital spending at roughly US$11 trillion between 2024 and 2029 – of which around US$5 trillion will need to be borrowed.
Figure 6: Estimated AI data-centre capex, 2024–2029 (~US$11 trillion, ~US$5 trillion of it debt-funded)
Source: SemiAnalysis estimates, August 2026.
That borrowing is one of the forces pushing bond yields higher – the tech giants can afford to pay 6–8% on their debt because their returns on AI computing are so high, but everyone else in the economy then has to compete with them for capital. It also means the market’s fortunes are increasingly concentrated in one theme: if AI revenues disappoint, the spending slows, and the growth it has been providing goes with it.
We are not forecasting a bust – some analysts argue the build-out is now effectively “too big to fail” and would be supported by government if needed, which itself implies more money-printing and is, again, favourable for gold. But at today’s valuations we think it pays to be selective about how much of a portfolio rides on one story.
7. Money growth: the quiet arithmetic behind it all
One final piece ties everything above together. Broad money – the total stock of cash and deposits – is growing at roughly 7–8% a year across much of the world: about 8% in Australia, 7.7% in China, over 14% in India. Globally, broad money reached a record US$150 trillion in June, up US$10.7 trillion in a year. Meanwhile, real economic growth and productivity in most of these economies is running at only 1–2%.
Figure 7: Broad money growth, % year-on-year (latest available)
Source: National central banks (M2/M3/broad money; Apr–Aug 2026).
That gap has to be absorbed somewhere – through consumer prices, inflated property and financial assets, rising debt, currency depreciation, or, most likely, a combination of all of them. The danger is not that 8% money growth mechanically equals 8% inflation; it is the persistent, compounding transfer of purchasing power away from cash and wages toward scarce, appreciating assets. Gold near US$4,500 an ounce, elevated property prices and record share market multiples are not separate stories – they are all the same story: more money chasing assets that cannot be printed.
8. What we are doing about it
Our view. If September and October bring the volatility the calendar suggests, we intend to use it. Portfolios are positioned to absorb a noisier stretch rather than to predict its timing.
If you'd like to discuss how these themes may apply to your portfolio or investment strategy, feel free to get in touch.