As we call full time on the Australian earnings season and share our final scorecard —a pass—we look ahead to what could be a game-changing 6 months for equity markets. While the timing is still uncertain (3-6 months away from Phase III results), if defined by the discovery of a COVID-19 vaccine and the broad reopening of economies there is potential for a considerable lift and rotation within equity markets, with more cyclical sectors like resources, banks, and selected industrials likely to perform strongly under this scenario.

Conviction Insights represents our highest conviction calls from across our coverage universe. With the Conviction Insights line-up unchanged this month, we take the opportunity to reiterate the primary criteria on which we assess stocks for inclusion:

The proportion of market earnings sourced offshore for Australian companies has risen in recent years, with around 25% of the S&P/ASX 100 earnings – ex-resources – exposed to offshore earnings.

We are around one-third of the way into the reporting season. The key theme emerging at this point is that COVID-19 has had a significant, but uneven impact on all businesses.

For the first time in almost 30 years the August reporting season for the Australian market is occurring against the unusual backdrop of both the domestic and global economies being in a recession.

This month we add Appen (APX) to Conviction Insights, a global leader in the collection, labelling and analysis of data used to build and continuously improve some of the world’s most innovative artificial intelligence and search systems.

The Information Technology sector has doubled in market cap since the S&P/ASX 200 bottomed in late March 2020. Since 2017, the sector has increased in size fourfold relative to the size of the Australian equity market, yet today only represents 4% of the market by market capitalisation.

We take a look at the latest earnings results and outlook for companies across the Wilsons Global Equity Managed Portfolio.