The August 2024 reporting season is set to reflect a subdued market earnings environment with consensus expectations for aggregate ASX 200 earnings growth of -3.5% in FY24. Despite the subdued earnings backdrop, there will be pockets of strength in certain sectors this reporting season, with risks skewed to the upside for the healthcare and insurance sectors.

The global equity uptrend should resume despite the US market falling 4.7% off recent highs, given expectations of a Fed rate cut in September and no recession on the horizon. In this report, we look at the macro backdrop for a soft landing in the US, and the implications for both the world economy and global equities.

After a period of strong performance from Goodman Group, we have trimmed our exposure to the company. While Goodman’s pivot towards data centre developments will underpin double-digit earnings growth over the medium term, this has been quickly priced in by the market. As a result, we have taken profits from Goodman Group and redeployed the proceeds into CSL and Aristocrat Leisure.

Despite touching fresh all-time highs, the Australian equities market continues to lag global stocks as the RBA’s monetary policy becomes increasingly out of step with other advanced economies.

The energy transition is set to drive a significant increase in capital investments into sustainable energy. Global capex on clean energy projects needs to rise above US$5 trillion p.a. to achieve net zero by 2050 according to the IEA. However, further investment into conventional energy will also be required over the coming years. Given this backdrop, the world is on the cusp of an energy capex ‘supercycle’, which Worley is well placed to benefit from over the medium and long-term.

The US has seen a remarkable 17% rally in the first half of 2024, driven by mega-cap tech stocks. The Magnificent 7 tech companies accounted for more than 60% of year-to-date gains. In this report, we explore the implications of this divergence in US stock performance, as well as whether valuations are in bubble territory and the prospects for broadening market participation.

Lithium prices have remained under pressure this year, driven by a combination of softer than expected battery-sector demand and an influx of new supply into the market. The Focus Portfolio remains selectively positioned in Arcadium Lithium and Mineral Resources, which as low-cost producers are well placed to weather the current weakness in the lithium price as we look through to a recovery over the medium-term.

Trump has a towering lead in the election race following his debate with President Biden. A win from the Republican candidate could create greater uncertainty for markets, particularly given his aggressive trade policies. In this report, we discuss the key policy differences between each candidate and the implications for financial markets.