The final quarter of 2021 is likely to be dominated by several competing cross-currents that have the potential to reshape the investment outlook. We preview four themes likely to dominate 4Q21 and the impact of each on members of the Wilsons Australian Equity Focus List.

There is no doubting the importance of the global energy transition as the world moves toward its net zero 2050 target. However, recent events in respect of both renewable and legacy energy supply disruptions across the globe have driven sharp rises in oil, gas and coal prices. Here we explore the impact of the energy sustainability pivot on the Australian energy sector.

The recent global macro concerns centered around China property developers have coincided with a seasonally weak period for equity markets. This creates an opportunity to add a high growth exposure to the Focus List. In response, we are adding further structural growth exposure to Wilsons Australian Equity Focus List with the addition of SEEK (SEK) following the removal of Sydney Airports (SYD). 

Healthcare A-REITs have two powerful themes behind them. Firstly, the mega trend of growing healthcare expenditure, which is expected to grow at close to double GDP into the foreseeable future. Secondly, the institutional ownership of healthcare property remains low in Australia by global standards. With healthcare exposed A-REITs largely undiscovered in Australia, we share our view on the compelling growth story within A-REITs and why we have HealthCo Healthcare and Wellness REIT (HCW) to the Wilsons Australian Equity Focus List.

As Australia continues to edge closer to vaccination targets of +70% and +80% the prospect of a sharp rebound in activity levels for many service-oriented businesses improves. With the reopening theme likely to dominate into the end of 2021, we have increased the exposure within the Wilsons Australian Equity Focus List to the domestic reopening theme.

The Australian market rallied through August, keeping pace with global equities. Our local earnings season gave a series of mixed messages and displayed a significant variance in results between sectors, with COVID-19 continuing to be a dominant factor in the operating environment.

We have pulled back our overweight banks call following a period of sustained outperformance. Key factors that have driven bank outperformance are now fading or are embedded in the consensus view and the prospect of further outperformance is now more balanced than it was 6-12 months ago.

Iron ore prices have fallen 35% since they peaked in May 2021 (at an all-time high), providing a headwind for share prices of the major miners - Fortescue Metals (FMG.AX), Rio Tino (RIO.AX) and Vale (VALE3.SA). In the short-term, the direction of the iron ore price is likely to dictate where the share prices of the iron ore majors head and there is likely to be significant hesitancy among investors in an environment where the iron ore price is falling.