The September quarter’s above-consensus reading for both headline and underlying inflation materially increases the risk of a November rate hike next week, in our view. 

Infrastructure (and ‘infrastructure-like’) companies have lagged the broader ASX 300 since late June, amidst the ongoing headwind from rising bond yields. Despite the recent underperformance, the outlook for infrastructure remains positive, especially at this point in the economic cycle.

Global inflation pressures appear to be easing despite a surprisingly resilient US economy and rising concerns over the global oil price. As we detail in this report, a continued easing in inflation should (all things equal) be supportive for both equities and bonds.

Recent updates from the ASX-listed general insurers, alongside the declaration of an El Niño event by the Bureau of Meteorology, have reinforced our constructive outlook for the domestic insurance sector, with our investment thesis for Insurance Australia Group (IAG) remaining intact.

While investors are intensely focused on the outlook for US economic growth and inflation, the strong revival from the US equity market over the past 12 months - alongside rising long-term interest rates - has thrown the spotlight back on global equity valuations.

Australian shares have been under pressure in recent months, largely due to ongoing strength in global bond yields. At a stock-specific level, this pullback has created attractive buying opportunities in select companies that have been oversold despite their strong fundamental outlooks.

The lithium sector continues to exhibit significant volatility. Critically, however, a positive structural outlook for lithium remains intact, which should support attractive long-term lithium prices and, by extension, significant cash generation from lithium producers.

The US economy has defied the bearish consensus this year, with fears of recession failing to be realized. This has helped US stocks rise, while US bond yields have risen as worst case economic fears fail to materialise.