The Australian share market could be in for a mixed reporting season with respectable results tempered by cautious outlook statements, as threats to corporate profits accumulate at home and abroad. We believe that Australian equities are more than likely entering an earnings downgrade cycle, and the reporting season this month may be one of the key catalysts to kick off further downward revisions led by risks relating to margin degradation. Here we detail what factors affect our outlook.

In recent months, we have argued a shift towards quality defensives has merit. As we move into the mid to late stages of the cycle, we prefer companies with resilient earnings profiles that are relatively insulated from the macro backdrop. In our latest Focus List update, we upweighted our exposure to quality defensives, which included increasing our position in leading telco company Telstra (TLS).

Since the beginning of the year, the real estate investment trust (REIT) sector has significantly underperformed in the broader market. We build a case for cautious optimism regarding the sector’s current prospects.

July has delivered a tough month for equity markets, compounding what was already a tough first half of the year. With concerns remaining around inflation and the increasing probability of a global recession we share our views for the Focus List in July.

Macquarie (MQG) is a quality business with the proven ability to position itself to take advantage of secular growth opportunities. We think the medium- to long-term opportunity for the Group is significantly stronger than other large cap financials on the market.

As central banks around the world joined a global rush to raise interest rates, we share how we’re balancing the risk/return profile of the Focus List as uncertainty around the risk of recession continues to bite.

As household spending begins to normalise over the next 12 months, we look at the outlook for earnings in a post-COVID world.

May was a tricky time to be an Australian investor with the market falling 3% over the month, underperforming the MSCI World ex Australia (-1.1%). We look at the market’s key concerns over the month and explain the changes we’ve made to the Focus List in June as a result.