Market Insights

Australian equity markets declined in November, with the S&P/ASX 200 falling 2.7%, underperforming most developed markets. Domestic sentiment was weighed down by a stronger-than-expected inflation print, which prompted a reassessment of the interest-rate outlook.

The introduction of the new monthly CPI series saw headline inflation print at 3.8% y/y, reinforcing concerns that inflation (particularly in services) remains more persistent than anticipated. With unemployment holding around 4.3%, markets are paring back expectations for further rate cuts, with policy now expected to remain restrictive for longer. There is even discussion emerging of rate hikes in 2026.

Performance was marked by sharp sector divergence. Healthcare (+2%) and Materials (+1.7%) were the best-performing sectors, supported by positive AGM updates and continued strength in gold-exposed stocks. In contrast, Information Technology (-11.6%), Financials (-6.5%), and REITs (-3.8%) lagged, as higher rate expectations and valuation sensitivity weighed heavily on duration-exposed assets.

Beneath the index, leadership continued to rotate. Small and mid-cap stocks again showed relative resilience, with the ASX Mid-Cap 50 the only major index to finish the month higher, while the ASX20 was the weakest performer. We believe this reflected both more attractive valuation starting points and increased investor focus on company-specific fundamentals amid macro uncertainty.

M&A activity remained a notable feature despite weaker markets. November saw continued interest across infrastructure and logistics assets, including bids for Qube and National Storage REIT, highlighting the growing disconnect between public market valuations and private capital’s assessment of long-term asset value.

Globally, November was characterised more by cooling momentum than outright risk aversion. Importantly, Fed communication has been less about committing to rapid cuts and more about watching the data, particularly around inflation and the labour market.

Europe remained subdued but stable. Inflation is continuing to moderate (including lower services inflation), and the ECB’s tone has been consistent with a wait-and-see stance.

Japan has continued to stand out as a relative bright spot, supported by earnings momentum and governance reforms. Meanwhile. China remains mixed with targeted policy support helping at the margin, but property-related weakness is still a meaningful headwind to confidence and activity.

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“In investing, what everyone knows is usually not worth knowing.” – Howard Marks

Market Insights

Australian equities ground higher through October, with the ASX 200 Accumulation Index rising modestly as company results, interest rate expectations, and commodity moves all impacted sentiment. Market leadership continued to broaden away from the large-cap financials and into cyclicals, gold, copper, and selective mid-cap industrials.

The domestic economic picture remains mixed, but in our opinion generally positive. Unemployment has stabilised at 4.2-4.3%, job vacancies continue to drift lower, and forward indicators of household spending remain soft. Inflation pressures are still present in services, but goods disinflation and weaker demand are helping overall CPI track down towards the RBA’s target band.

The market continues to price a single RBA rate cut by mid-2026, though global easing cycles (particularly in the U.S. and Europe) are expected to tighten relative yield differentials into the new year.

Reporting is still seeing dispersion. Travel and Leisure names delivered strong results, while consumer goods, healthcare services, and building materials were more mixed. Small and mid-caps outperformed again, supported by strong gold and copper moves, and ongoing M&A interest across technology, energy, and telecom infrastructure.

Commodity markets played an important role in equity returns.

Gold remained well bid near record levels, supported by central bank buying and lower global real yields. Copper continued its rally as supply-side constraints and Chinese restocking drove spot demand. In contrast, energy exposed sectors lagged, as oil fell sharply on rising global inventories and waning geopolitical risk premium.

Global equities rose again in October, with the MSCI ACWI (AUD) posting a positive return as major central banks indicated confidence that inflation is sustainably easing.

The U.S. Federal Reserve cut rates 25bps in October and is now holding policy steady. However, it did reiterate that additional cuts in early 2026 are likely (albeit slowing and potentially coming to an end), with softer labour market prints signalling that excess heat has finally left the jobs market. The ECB remained on hold, highlighting improved inflation momentum across Europe. Japan continued to perform strongly as earnings remained robust and governance reforms drove capital returns.

China remained mixed: manufacturing PMI are neutral to soft, but property sector data remained weak. Policymakers announced targeted stimulus measures late in the month, including liquidity injections and credit support for housing completions, providing some stability for commodities and related equities globally.

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“Discipline is doing what needs to be done, even when you don’t feel like doing it.” – Unknown

Market Insights

Australian Market

The S&P/ASX200 Accumulation Index rose 3.1% in August, marking another strong month for Australian eqAustralian equities were mixed in September, as investors balanced optimism over U.S. rate cuts with domestic inflation pressures and cautious RBA commentary.

The ASX 200 Total Return Index fell -0.8%, with energy (-9.8%) the weakest sector, impacted by the collapse of the proposed Santos takeover. Materials (+9.2%) led the market, supported by a broad rally in gold miners as the metal neared US$4,000/oz.

The domestic economy continues to show resilience.

Australia’s August CPI rose 3.0% YoY, the highest reading in a year, as electricity rebates rolled off and household service costs increased. Markets now price only one RBA rate cut by March 2026, down from two at the start of September. Unemployment held steady at ~4.2%, with solid full-time job growth but a decline in vacancies, suggesting the labour market is starting to cool.

Performance across market segments diverged sharply. Small and mid-cap equities again outperformed: the ASX Small Ordinaries Accumulation Index gained +3.4%, and the ASX300 ex-20 rose +0.85%, while large caps were flat to down. In our opinion, this rotation reflects growing investor interest in companies with earnings leverage to falling global rates, particularly gold, copper, and early-cycle industrials.

Defensives such as Consumer Staples and Healthcare lagged, while higher-growth sectors like Technology, Biotech, and Defence posted strong gains. Meanwhile, the “defence spending thematic” gained further momentum, pushing stocks such as DroneShield, Electro Optic Systems, and Codan spiking higher.

Global Markets

Global equities extended their upward trend in September, with the MSCI ACWI (AUD) gaining 2.33%, with local market gains partly offset by AUD strength. Emerging markets led the rally, driven by China’s partial recovery and semiconductor strength across Asia.

In the U.S., the S&P 500 advanced around +3.6%, propelled by resilient earnings and shifting Fed expectations which cut interest rates by 25 bps to 4.00%-4.25%, its first reduction of 2025. Core inflation was roughly stable, and the labour market is showing signs of loosening.

European markets posted modest gains amid a backdrop of easing inflation and soft growth. The ECB held policy steady, emphasizing a wait-and-see stance given historically aggressive cuts earlier in the year.

Asia delivered standout returns: Japan extended gains, with the Nikkei hitting multi-decade highs, supported by corporate profit strength and a benign BoJ posture. China’s equity rebound was powered by renewed stimulus expectations, whilst trade tensions continue to be watched.

Commodities diverged: gold continues to surge (up another ~+10%), driven by real yield compression and liquidity optimism. Oil was volatile and weakened over the month. Copper rebounded up month-over-month, reflecting hopes of renewed industrial demand.

Geopolitically, markets watched the U.S. budget impasse (leading to a government shutdown) with caution and the court victory shielding Fed Governor Lisa Cook from removal, boosting perceptions of some stability. Meanwhile, the U.S. and EU have progressed a framework to resolve tariff friction, and the U.S. and Japan revised auto import agreements, reducing trade overhangs.

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“Discipline is the bridge between goals and accomplishment.” – Jim Rohn

Market Insights

Australian Market

The S&P/ASX200 Accumulation Index rose 3.1% in August, marking another strong month for Australian equities. Markets were buoyed by a third RBA cash rate cut this year, bringing the rate to 3.60%, and supported by global signals from Jackson Hole that U.S. policy easing is likely in September.

The August reporting season provided a wealth of insight into corporate resilience.

Consumer optimism surprised to the upside: retailers exposed to household goods reported accelerating sales growth of 4-8% in early August, particularly in hardware, electrical, and furniture. This momentum reflected the compounding effect of two RBA cuts (in February and May), robust wages growth, and ongoing house price appreciation. Despite higher household debt, in our opinion these factors underpinned spending, showing the Australian consumer is resilient.

Banking sector results reinforced this resilience. CBA reported lower impairment charges, while NAB flagged stabilisation in arrears, suggesting stress levels are moderating. Regulatory reforms post-GFC and a more supportive approach to arrears management have also softened the impact of higher borrowing costs.

Sector performance was diverse:

• Materials (+9.0%) and Energy (+1.6%) rallied as Chinese policy support lifted commodity demand. Importantly, China announced large-scale infrastructure initiatives and began tackling industrial overcapacity in steel, aluminium, and solar, improving outlooks for exporters.
• Healthcare (-13.3%) was hit hard led by CSL (-21.4%) after delaying gross margin recovery expectations. Globally, healthcare budgets and reimbursement rates are failing to keep pace with inflation and rising operating costs.
• Consumer Discretionary outperformed as rate-sensitive names rallied on stronger spending signals.

Reporting season was notable for its volatility: average share price moves on result day reached ±8.3%, on our assessment, the most volatile season on record. We believe that algorithmic and systematic trading amplified these swings, leading to dislocations between earnings revisions and share price reactions. For long-term investors, such volatility provides opportunities to differentiate between short-term distortions and genuine shifts in company value.

Global Markets

Global equities advanced again in August, but leadership narrowed, and dispersion increased across regions and styles. The MSCI ACWI (AUD, Net Return) rose +0.8%, extending a four-month winning streak.

Materials (+5.3%) led on firmer commodity prices and improving industrial demand signals, while Healthcare (+3.1%) and Communication Services (+2.5%) also contributed; Consumer Staples (-1.1%) and Real Estate (-0.8%) lagged as risk appetite remained firm.

US equities closed at fresh highs, yet the rally’s breadth was less even than earlier in the year, with growth- and cyclical-exposed segments continuing to carry most of the load.

• United States. The S&P 500 and Nasdaq posted a fifth straight monthly gain, supported by an earnings season in which over 75% of companies beat expectations. Core inflation cooled modestly, while headline was nudged up by firmer energy; the Fed stayed in wait-and-see mode ahead of September.
• Europe. Major indices (Euro Stoxx 50, DAX) ground higher despite softer hard data. Manufacturing stayed weak, but services stabilised and inflation continued to moderate, allowing the ECB to reinforce a cautious easing path (further cuts contingent on sustained disinflation). Earnings were broadly supportive overall; industrials and luxury outperformed, while banks came under pressure as investors reassessed profitability in a lower-rate environment.
• Asia. Performance was mixed. China struggled to maintain July’s momentum as weaker property data and ongoing geopolitical tension weighed on consumer and financials, even as policy support and tech earnings offered some offsets. Japan extended gains on robust corporate profits, a weaker yen, and steady export demand; the BoJ kept to a gradual normalisation, a stance equity markets interpreted as supportive for risk assets.

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