The "Bank of Mum and Dad" is a commonly heard phrase nowadays, stemming from a combination of high housing prices and low level of affordability given Australia’s rising living costs.

The outlook for the Australian insurance sector remains attractive with positive earnings momentum likely to persist over the medium-term. The Focus Portfolio retains an overweight exposure to the insurance sector relative to the ASX 300.

US Core CPI for April eased moderately on both a month on month (+0.3% from +0.4) and year on year basis (+3.6% from +3.8%). This was in line with consensus expectations but still prompted a sharp decline in bonds yields, a fall in the US dollar and a greater than 1% bounce in the S&P500 to a fresh record high.

For the second year in a row, last night Treasurer Jim Chalmers announced that the Federal Government is on track to deliver a budget surplus. The FY24 budget now forecasts the budget balance in 2023/24 will be a surplus of +$9.3 billion.

Following the release of half-yearly / quarterly updates from each of the Big 4 Banks this month, our sector view remains unchanged with the Focus Portfolio retaining an underweight exposure to the sector. While the banks reported broadly sound results for 1H24, the sector’s medium-term earnings outlook is still challenged while valuations remain stretched relative to history.

While the US equity market has been buffeted recently by shifting expectations for inflation and interest rates, corporate earnings continue to be a positive support. While positive earnings surprises are expected during US reporting seasons, we believe a stronger signal is coming from revisions to forward estimates with S&P500 forward earnings estimates having been moderately upgraded during reporting season.

Higher than expected inflation has dampened market hopes for lower Reserve Bank (RBA) policy rates later this year. We have shifted our base case expectation for policy easing from late 2024 to first quarter of 2025, albeit we still see some chance of a late 2024 cut if a clearer disinflation trend re-emerges over the next couple of quarters.

While the ASX 300 A-REIT Index has outperformed this year, the sector’s performance has been highly concentrated in nature driven by strong returns from large index constituents including Goodman Group. The sector remains well placed over the medium-term with a number of A-REITs still trading on attractive discounts to their underlying asset valuations, including HealthCo Healthcare and Wellness REIT (HCW) which has been materially oversold amidst misguided concerns regarding the ongoing restructure of its key tenant Healthscope.