The February 2023 reporting season was a ‘mixed bag’, with a relatively large dispersion of outcomes between different sectors and companies.  In aggregate, the ASX 200 experienced downgrades in February, as analysts factored further evidence of lingering cost pressures and a softening consumer into their forecasts. In this note, we explore how our Focus Portfolio is positioned in relation to the key themes we are paying attention to from reporting season.

After a strong start to the year, stocks are pulling back again while bond yields and the US dollar are rising. There is renewed fear that the US economy is too strong for inflation to come down significantly.

Emerging markets faced a number of headwinds in 2022. We believe the factors underlying these headwinds are now turning into tailwinds that should boost EM performance for at least the next 12 - 18 months.

Identifying companies that will make suitable takeover targets can make for very lucrative investments. Normally, companies are acquired at a significant premium to their current share prices, and any hint of a possible acquisition creates some positive momentum even before the acquisition occurs.

Despite financial markets making a strong start to the year, investors still appear skittish as uncertainty oscillates between fears of a too hot (inflation) and too cold (recession) macro backdrop. As we explore in this week’s report, these bear case scenarios have been interspersed with what appears to be the Goldilocks scenario of “benign disinflation.”

After renewed optimism at the start of this year, can earnings deliver over the next few weeks? That is the question for most investors as we enter reporting season. Here, we provide our outlook on the looming reporting season.

Australia’s consumer price index (CPI) lifted 1.9% in the December quarter, taking the annual headline rate to 7.8%. This was above the consensus estimate of 7.5%. In this report, we discuss the implications of an upside inflation surprise for financial markets, and we consider how stubborn Australian inflation is likely to prove over the coming year.