One of the key themes in reporting season was the positive impact of cost disinflation or deflation on certain companies. The Australian economy is in the early stages of disinflation, so has further runway on this theme.

The results of the Australian reporting season reveal a number of upgrade and downgrade themes for listed companies. We document the key themes of reporting season and detail how they are influencing moves in our portfolio.

As we hit the halfway point of reporting season, we have seen a resilient domestic and global economy support FY23 earnings. So far, there have been more beats than misses for FY23, but this positivity has not extended to upgrades for FY24.

The Australian reporting season is underway and the overall mood remains relatively cautious. Although it's premature to offer a definitive assessment of the reporting season, we have spotlighted several critical earnings reports.

When comparing price to net asset values (NAVs), at face value the A-REIT sector looks cheap. However, this doesn’t capture the whole picture. We believe NAVs are overvalued due to the impending impact of higher bond yields and uncertainty surrounding asset class demand at a sub-sector level.

The upcoming Australian reporting season could be a key catalyst for broader market downgrades. We explore the driving factors including softening demand in cyclical sectors and identify sectors that may be more resilient.

We delve into five bottom drawer stocks - CSL (CSL), Macquarie (MQG), Worley (WOR), NextDC (NXT), and Netwealth (NWL) - the investing themes they align with and the reasons we believe they should be held over the long-term.

Including Australian gold miners in our equity portfolio offers several advantages. Their long-term performance, diversification benefits, and potential for outperformance in a rate-cut environment make them an attractive investment at this point of the cycle.