The Australian equity market is on track for a strong financial year return (14%) and remains in positive territory for the current calendar year. 

The Australian equity market has seen a downward shift in earnings expectations over the past three months, signalling that the market is moving firmly into a downgrade cycle. In the near term, earnings revisions will be an increasingly important driver of relative company performance, in our view.

The retail sector has witnessed a sell-off in response to soft trading updates and the prospect of further interest rate hikes, with the rising cost of rent and the sharp increase in the minimum wage further impacting the industry. Retail stocks may appear cheap, considering the recent sell-off. However, a critical consideration is the reliability of earnings reflected in price-to-earnings (PE) ratios.

The US market has risen 10% this calendar year and is up 18% from its October 2022 lows, despite widespread investor bearishness around US market prospects. The US does remain more than 10% below late 2021 highs, allowing the bears to continue to label the rebound as just a bear market rally.

Both Australian and US consumer confidence surveys are wallowing at very depressed levels. However, both economies continue to register multi-decade lows in unemployment, and consumer spending has so far remained relatively resilient.

Gaming revenues have shown resilience over time, as the industry tends to be relatively unaffected by economic downturns. Gaming stocks offer the Focus Portfolio resilient growth in a part of the cycle where we believe this is key to outperformance. In this report, we outline our viewpoint on gaming, and detail our key holdings in the sector.

While inflation has proved sticky in recent months, our analysis suggests that we are on the cusp of a significant deceleration in US inflation. As we explore in this report, this should “all things equal” be supportive for risk assets.

While copper has weakened recently due to global economic concerns, long-term we are structurally bullish when it comes to the copper price. Demand for copper is currently subject to a degree of cyclicality, given its wide range of industrial uses which ebb and flow with the state of the broader economy. Longer term, significant structural growth in demand for copper as significant quantities will be needed for the energy transition.