Amidst a climate of heightened confidence, risk assets are rallying, underpinned by a broader improvement in global risk sentiment. Investors are increasingly optimistic that policymakers will orchestrate a soft landing in 2024, a sentiment that gains support from recent economic data releases.

Although earnings revisions have slipped back into negative territory again, the proportion of downgrades to upgrades remains reasonably normal by historical standards. Despite lingering concerns around the economic outlook, there is no evidence of a significant worsening in the downgrade cycle for now.

US equities have staged a strong revival this month bouncing back to within 1% of their late July highs. A more benign macro outlook has been the primary catalyst for the bounce-back with recent evidence that the resilient US economy is cooling gradually.

After a lacklustre set of results from the banks, the portfolio is moving further underweight the banks, trimming NAB by 2%. At the same time, we are adding Steadfast Group at 2% to increase our weighting in the insurance sector, which unlike the banks has cyclical tailwinds over the next 12-24 months.

Despite calls for structurally higher inflation, US headline CPI appears to be falling as fast as it went up. This should provide support for both fixed interest and equity markets over the coming year.

We remain underweight the two major supermarkets  - Woolworths (WOW) and Coles (COL). Supermarkets’ earnings received a ‘sugar hit’ from food inflation in recent years, but there is a risk this tailwind is easing. Cost pressures and elevated valuations are additional reasons for our underweight.

While a number of the world’s major central banks have recently hit the policy pause button (most notably the US Fed), the Reserve Bank of Australia lifted rates 25 basis points to 4.35% last week.

Copper demand is poised to increase over the next decade. Despite facing challenges in traditional cyclical sectors like construction, manufacturing, and appliances, copper demand should remain resilient, driven by an overriding trend: the global energy transition.