CONTRIBUTORS
Reece Birtles
Chief Investment Officer, Martin Currie Australia
In the six months since we provided our wrap of Australia’s reporting season “Paying the Piper”, we have really seen the significant Reserve Bank of Australia (RBA) rate rises and inflation impacts that were just beginning to show.
We are now much further through the cycle and “looking over the edge” of a potential earnings recession, GDP recession, or both. At the time of writing, we are also absorbing news of the collapse of Silicon Valley Bank (SVB) in the US which has added further complexity into an already uncertain outlook.
Our analysis and one-on-one meetings with company management over February and March have highlighted that the consumer was still showing resilience in spending and company revenues remain strong. However, margin pressures are beginning to bite at earnings growth as sales begin to slow and costs continue to rise. And this is before the likely future interest rate rises and mortgage cliff.
As the world continues to normalise to higher rates and long-term inflation expectations, the market thematic continues to play towards an ongoing attractive environment for the Value style.
It is as important as ever for Investors to be discerning in their stock picking, focussing on companies that can grow earnings and dividends in this environment and not be exposed to valuation risk.
Our bi-annual reporting season paper will cover the following in finer detail:
- Our top-down analytical and aggregated review of the reporting season’s results for S&P/ASX 200 stocks.
- A deeper dive into the issues and themes that are driving earning results – based on the 100+ meetings with company management teams undertaken by the MCA investment team over the period.
- The big picture outlook for Australian equities, and how our views are reflected in our portfolio positioning across Value, Sustainable and Income styles.
IMPORTANT INFORMATION
This publication is issued for information purposes only and does not constitute investment or financial product advice. It expresses no views as to the suitability of the services or other matters described in this document as to the individual circumstances, objectives, financial situation, or needs of any recipient. . You should assess whether the information is appropriate for you and consider obtaining independent taxation, legal, financial or other professional advice before making an investment decision.
Issued by Franklin Templeton Australia Limited (ABN 76 004 835 849, AFSL 240827).
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