Key Takeaways 

• Australian Market Outlook: In 2024, Australian banks thrived while cyclical sectors struggled, and the ASX200 remains at high valuations driven by the big banks. With higher interest rates benefitting savers but burdening borrowers, and the economy relying on immigration and government spending, the outlook remains uncertain due to persistent inflation pressures. 

• Global Positioning: Globally, maintaining a long-term, valuation-driven strategy has historically outperformed. While strong earnings growth now seems more achievable due to improved retail performance and cheaper production costs. 

• Monetary Policy and Economic Conditions: While our base case is a soft landing, we believe the risks lean towards persistently high inflation and prolonged higher rates rather than a deflationary shock. Strong growth, resilient labour markets, rising real wages, and supportive fiscal spending should generally lead to positive outcomes for risk assets. 

• China’s Market Surge: China’s stock market rally, driven by government support, depends on further fiscal stimulus to sustain momentum, particularly in addressing the property market downturn. 

• Portfolio Adjustments: We have adjusted our portfolio to maintain a neutral equity weight, with a more balanced position in fixed income. We emphasise value equities and defensive positioning in Australia.