The ASX 300 fell 0.6% last week, but the index number disguised a sharp change in leadership. 

Financials dragged, with NAB confirming what its listed peers had already flagged: higher rates and the May Budget's property-tax changes have chilled housing, with mortgage applications down a steep 15%, led by investor loans, and much softer credit growth expected into 2027. The consumer is running at two speeds, JB Hi-Fi and Temple & Webster flagged much softer recent trading, while Breville and Super Retail found their more premium customers resilient, with Breville's early progress in China, Mexico and Korea suggesting a long runway. 

The other side of the rotation was an historic rally in long-unloved healthcare, CSL surged on a result ahead of market fears, dragging Cochlear and Ramsay Health Care up from recent lows, and continued strength in materials, where BHP trades near 52-week highs with copper contributing more than half of group earnings for the first time. A spate of private-equity and trade approaches (Equity Trustees, Reliance Worldwide, Cleanaway, plus James Hardie's US$980m European divestment) completes the picture: in a short-term, momentum-driven market, takeovers are an important signal of fundamental long-term value.

Bessent, the Fed and the price of credibility

Offshore, the week belonged to the long end of the bond market. US 30-year yields touched 5.34% (the highest since 2007) and surprisingly hawkish July Fed minutes brought a rate hike back into view. The Treasury's response, doubling long-dated buybacks from roughly US $16bn to US $23bn a quarter from 9 September, bought only a brief reprieve before yields ground back towards their highs. Andrew Hunt frames this as Mr Bessent running a "price-keeping operation" in the debt markets while the Warsh Fed continues QE. The Treasury still has room to draw down its general account, a recipe for liquidity injections that "may support markets on specific days". These are tactics but, as Andrew writes, the longer-term, deeper problem is funding. The sovereign-wealth inflows that have underwritten America's current account may now be slowing after recent White House interventions, and in Hunt's words "the foundations of the US's long credit cycle are now being tested". He believes the US dollar has turned, remains negative (though not aggressively so) on Treasuries, and would be cautious on risk assets over the medium term even as the public sector pumps liquidity.

What this means for bonds in portfolios

A century and a half of data puts the week in context: the reliably negative stock/bond correlation of 1998–2020 was the exception — a disinflation-era artefact — not the rule, and since 2022 the correlation has been positive again. When inflation and fiscal credibility drive markets, bonds and equities tend to fall together. Bonds now offer their best income in nearly two decades, which is a genuine reason to own them, but as a source of return, not a reliable airbag.

Locally, Wednesday's monthly CPI is the key print alongside the RBA minutes; offshore, Bessent is due to detail his fiscal plan and measures against Iran, and Jackson Hole closes the week with Fed Chair Warsh's speech the next likely catalyst. These are worth watching as we seem to be at the foothills of a new market regime which may define what effective portfolio construction over the next decade or so looks like.