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.

So far, 2023 is proving to be a year of 2 phases for global equity markets. Stocks generally rallied throughout the first 7 months of the year, despite bank turmoil weighing on markets in Q1, but this upward momentum has since morphed into a correction phase.

The September quarter’s above-consensus reading for both headline and underlying inflation materially increases the risk of a November rate hike next week, in our view. 

Infrastructure (and ‘infrastructure-like’) companies have lagged the broader ASX 300 since late June, amidst the ongoing headwind from rising bond yields. Despite the recent underperformance, the outlook for infrastructure remains positive, especially at this point in the economic cycle.

Global inflation pressures appear to be easing despite a surprisingly resilient US economy and rising concerns over the global oil price. As we detail in this report, a continued easing in inflation should (all things equal) be supportive for both equities and bonds.

Recent updates from the ASX-listed general insurers, alongside the declaration of an El Niño event by the Bureau of Meteorology, have reinforced our constructive outlook for the domestic insurance sector, with our investment thesis for Insurance Australia Group (IAG) remaining intact.