Market Update – September 2022

ASX Reporting Season

Macroeconomic events overshadowed the recent ASX reporting season.

Fundamentals have taken a back seat whilst central bankers drive investor sentiment.

Over a 6-week period in June and July, global equities rallied +14% on speculation the FED would slow down their rate hikes; however, this was not the case (yet), and global equities swiftly retreated -6% over the last few weeks. 

Just yesterday, the ASX200 gained +1.8% post a news conference from the RBA Governor, which seemed to portray a reduction in future rate hikes from +0.50% to +0.25%.

Nevertheless, long-term returns are driven by fundamentals, and notably, the recent ASX results and the outlook for FY23 were better-than-expected or, as one analyst said, “less bad than feared”.

Generally, results in beaten-up sectors were not as bad as everyone expected, and equally, results in favoured sectors were not as good as everyone expected.

• 80% of Technology companies delivered earnings that were better than expected, whilst 60% of these companies upgraded their future outlook
• Only 17% of companies within the Materials sector upgraded their future outlook to earnings after 61% of them delivered earnings that were better than expected

Rising input costs have weighed on the outlook, with roughly 2/3 of companies seeing revised earnings from analysts due to expected profit margin pressures. Earnings growth across the ASX200 is now expected to be -1.6% for FY23.  

The central banker mindset of ‘some pain’ now is better than ‘far greater pain later’ supports a vigilant approach over the short-term but equal awareness of long-term opportunities.

We have topped-up some well-known quality names for clients that have been underweight.

From an asset allocation perspective, we continue to prefer liquidity and flexibility through a higher-than-normal allocation to Cash.   

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