Aussies have overseas holidays on their minds. But has Zoom impacted corporate travel for good? How will ASX travel stocks fare in 2022? Pendal analyst Sondal Bensan has some answers

• Leisure and corporate travel to bounce back
• Investors have under-priced some ASX travel stocks
• Find out about Pendal Focus Australian Share Fund

Will Zoom kill corporate travel? Or at least wound it?

This is arguably the biggest unknown for travel stocks in the post-Covid world, because corporate travellers are higher-yielding than leisure tourists.

“People had thought there would be a permanent loss of corporate travel demand because of video conferencing platforms like Zoom. But I think it will come back pretty strong with just a bit of a lag,” says Pendal Australian equities analyst Sondal Bensan.

“We always thought leisure would come back strong and business would be a bit of a drag. But it looks like there hasn’t been any permanent damage.

“Before Covid, demand for the sector was growing at a couple of per cent per annum. Now we’ve had two years of interruptions, but the post-Covid starting point should be a trend line above the previous level.

“That reflects both natural growth and a phenomenal wave of pent-up demand.”

A rebound in corporate travel has not been fully priced into some travel stocks, including Qantas, he says.

“The market is pricing in part of the revenue recovery but it’s not pricing in the margin outcome from that recovery.

“The profitability post-Covid from domestics and international travel could be significant. Investors have priced in domestic re-opening but not international.”

Bensan says margins will be higher both because of stronger-than-expected demand from corporate travel and also because airlines in particular have done a very good job at maintaining pricing, even during the pandemic.

“We’ve seen it in the US, New Zealand and here. That’s been a big surprise — the industry’s ability to manage prices.”

Some travel and tourism stocks tumbled when Covid hit, then experienced a massive adjustment period and emerged more efficient. Bensan expects some airlines, including Qantas, will do the same.

Factors to watch

No sector has been hit harder by the pandemic than travel and tourism.

But the best operators have been able to withstand the tumbling revenue and restructure. And as the economy heads towards a post-Covid phase, there are other kickers that will substantially help the sector.

Throughout the Covid period there has been glimpses of what might be for the sector.

“If you look at late last year and then the June quarter, the recovery in travel was quite remarkable. It ramped back up a lot quicker than many people thought.”

There are other factors helping travel and tourism stocks.

Many will have tax losses they can carry forward. Also working capital should benefit balance sheets in the short term, based on the experience of the industry during the June quarter, when travel and tourism re-opened ahead of the most recent lockdowns.

“There will be the initial surge in cash from people starting to make bookings again,” Bensan says, and he expects travellers will make plans further in advance, elongating the gap between payment and travel.  

“People’s attitudes will change. They will book in school holidays well in advance. Booking international travel will be longer duration that it ever used to be.”

Significant Features: The Barrow Hanley Concentrated Global Share Fund is an actively managed, concentrated portfolio of global shares and is diversified across a broad range of global sharemarkets.

Fund Objective: The Fund aims to provide a return (before fees, costs and taxes) that exceeds the MSCI World ex Australia (Standard) Index (Net Dividends) in AUD over the medium to long term.

The Strait of Hormuz blockade wasn’t an isolated shock. Understanding what was already in motion is the key to reading what comes next, argues Pendal’s AMY XIE PATRICK

• Sticky inflation persists; central banks must stay hawkish
• Oil disruption, not conflict, drives market risks
• Find out about Pendal Dynamic Income Fund and Pendal Monthly Income Plus fund

STICKY and rising inflation was already a problem before the global economy encountered the most recent oil shock.

In the US, core Personal Consumption Expenditure — the Fed’s preferred measure of underlying inflation — has been stuck around 1% above the Fed’s 2% target since mid-2024.

Core PCE itself hasn’t been at 2% for five years.

In Australia, reflation was already underway, causing the RBA to initiate a new hiking cycle.

Markets are now pricing a peak cash rate of around 4.75%, roughly 40 basis points above the peak of the entire 2022-23 hiking cycle.

Demand has been running ahead of supply in both the US and Australia.

By the RBA’s own estimates, the output gap – the difference between how much the economy could produce without creating inflation and how much it is producing – is positive and accelerating in Australia.

Meanwhile, consumer demand in the US has remained resilient while a new cap-ex cycle is in full swing, led by AI and technology.

Higher oil prices never guarantee higher core inflation, but this robust demand backdrop gives businesses the pricing power to pass on higher costs to customers.

The job of central banks is to ensure that the inflation coming over the next few months doesn’t embed itself into persistent expectations.

Separate the conflict from the oil disruption

It’s easy to conflate the geopolitical conflict with the economic disruption, but they can – and likely will – diverge.

Ceasefire talks could extend indefinitely (just as the Ukraine conflict did), and at some point markets move on regardless.

What matters for economies is whether oil and energy supply chains normalise.

That could happen through alternative shipping routes or new sources of supply coming online, independent of diplomatic moves.

In a scenario where the conflict drags on but oil logistics recover, we can expect a higher-for-longer oil price.

At the same time, a severe demand-destruction scenario, where fuel shortages cause genuine economic contraction, becomes a much smaller tail risk.

That’s why at Pendal we are less focused on ceasefire odds and more on the following data:

1. Vessel flows: Limited, but not zero

While commercial traffic through the Strait of Hormuz is still down sharply since February, it has started to recover.

The Bloomberg graph below shows rolling 7-day transits rising at the end of April (compared to 758 on February 28).

2. Tanker indices: Elevated, but coming off the boil

The next graph below shows baltic dirty (crude oil) and clean (LNG) tanker indices.

Tanker indices are market price benchmarks for hiring oil and gas tankers. They act as a real‑time barometer of stress or recovery in the global energy supply chain.

This data suggests early signs that oil logistics are beginning to normalise from the peak of disruption.

Shortages will still be felt in parts of the world, but the probability of severe demand destruction is falling as supply chains adapt.

Our view: Inflation above recession

With demand resilient and the worst supply scenarios becoming less likely, we believe the dominant risk is inflation running higher for longer — not a growth collapse.

The positive output gap that existed before the shock means businesses can protect margins. Corporate profitability should therefore hold up reasonably well in the near term.

We expect the uncertainty of inflation data in coming weeks and months to drive episodes of bond-market volatility.

However, as long as corporate profitability and economic activity remain healthy, equity markets should be able to confidently weather this volatility.

Indeed, once tail risks become the central case, risky assets tend to stabilise and move on.

Fuel inventories are the key variable to watch for when the scales tip from inflation to growth concerns.

Inventories have also not changed meaningfully yet due to the lag between when oil leaves the Middle East to when it reaches Australia in the form of ready-to-use fuel.

In-bound shipments of fuel have also been supported by Asian refining nations running down their own excess reserves to capture higher margins.

However, those refining nations will turn towards protecting their own supplies over supernormal profits if the shortfall of global oil supply persists.

Portfolio positioning: Minimal duration, selective on credit, tactical on equities

The Pendal team has cut portfolio duration back to minimal levels.

With growth resilient and inflation elevated, duration doesn’t offer compelling risk-reward.

The market is pricing two more hikes from the RBA, and no policy change from the Fed.

We’d rather preserve flexibility and add duration when either inflation fears are more meaningfully priced into yields, or the data mix shifts enough to suggest that bond markets have already discounted the worst.

On credit, we made an active decision to de-risk in early March – not on a prediction of what would happen, but because the asymmetry was clear.

If markets normalised, we could replenish exposures from primary issuance, likely at more attractive levels than pre-war.

If conditions deteriorated sharply, the additional cash gave us the flexibility to either protect liquidity or selectively buy into forced selling.

As it turns out, credit markets have remained functional and primary activity has picked up. We’ve used that window to rebuild some exposures, but we’re being deliberate about it.

Australian credit markets have been well supported in recent weeks due to the higher all-in yield that corporate bonds now offer.

However, most of that rise in yields is due to risk-free rates reflecting inflation concerns, rather than credit spreads reflecting higher credit risks from corporate borrowers in a more uncertain macro environment.

It’s vital to treat the interest rate-setting and the credit exposure of the portfolio as two separate and intentional choices.

The two can behave very differently depending on the economic and market backdrop.

When adding corporate bonds to our portfolios, we want to ensure that we are being compensated specifically for taking on extra credit risk.

On equities, fundamentals remain reasonably supportive in the near-term.

Positive demand conditions, the ability to pass through costs, and the stabilising effect of tail risks being well-flagged all point in the same direction.

The key watch item remains the consumer tipping point.

If demand destruction comes from fuel shortages or the cost of living itself, the equity story changes. We’ll be watching the data carefully for early signs of that transition.

Bottom line: Higher for now, with eyes on demand

As we can see, the oil shock met with pre-existing economic trends that were bond-bearish: sticky inflation above central bank targets and resilient economic growth.

This backdrop does not afford the RBA the luxury to “look through” the supply-side shock, and in line with market predictions has again raised interest rates by 25 basis points to 4.35%. 

While we want to see greater bond market discounting of inflation headwinds, we continue to monitor the ability of both businesses and consumers to deal with rising costs.

In the meantime, our income portfolios continue to access core income through Australian credit markets, as well as having the option to tactically engage in return boosters such as Australian equities as market sentiment recovers from recent volatility.

In a cycle where the inflation and growth mix can shift quickly, preserving the option – rather than the obligation – to add interest rate exposure is one of the most valuable tools that we have.

In this new podcast, AMY XIE PATRICK, head of income strategies at Pendal, unpacks how geopolitical tensions, sticky inflation and higher oil prices are reshaping bond markets

You can also listen to this podcast on Apple or Spotify

An excerpt from this podcast with Pendal’s head of income strategies, Amy Xie Patrick:

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Amy Xie Patrick explains why inflation expectations — rather than growth fears — are driving yields higher, and why investors need to be selective as credit spreads fail to fully reflect downside risks.

“Even if all of the Middle Eastern issues were to go away tomorrow, I think naturally the oil market would just embed a higher level of structural risk premia in its price. And as a result, what I would be looking for the direction of bonds in the very near term is for more of those inflation fears to play out,” Xie Patrick says. 

The podcast also explores lingering AI‑related credit concerns, liquidity risks, and what this complex backdrop means for duration, credit exposure and equities.  

Listen to the full podcast to hear more on traversing the fixed income markets in uncertain times.

In this new podcast Pendal’s head of government bond strategies TIM HEXT provides his insights on inflation concerns arising from the Iran conflict and what that means for fixed income investors.

You can also listen to this podcast on Apple or Spotify

An excerpt from this interview with Pendal’s head of government bond strategies Tim Hext:

Heightened geopolitical risks and rising oil prices have re-ignited inflation concerns, creating uncertainty for central banks and markets.

Pendal head of government bond strategies Tim Hext explains why second round inflation effects matter more than petrol prices themselves, and why the RBA faces a difficult balancing act on rates.

Despite the volatility, government bond yields are at levels not seen since 2011, presenting compelling medium to long term value, particularly for investors seeking inflation protection.

Listen to the full conversation to understand why fixed income may deserve a closer look in portfolios right now.

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About Tim Hext and Pendal’s Income & Fixed Interest boutique

Tim Hext is a Pendal portfolio manager and head of government bond strategies in our Income and Fixed Interest team.

Tim has extensive experience in banking, financial markets and funding including senior positions with NSW Treasury Corporation (TCorp), Westpac Treasury, Commonwealth Bank of Australia, Deutsche Bank, Bain & Co and Swiss Bank Corporation.

Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.

Find out more about Pendal’s fixed interest strategies here

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About Pendal

Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.

In 2023, Pendal became part of Perpetual Limited (ASX:PPT), bringing together two of Australia’s most respected active asset management brands to create a global leader in multi-boutique asset management with autonomous, world-class investment capabilities and a growing leadership position in ESG.

Contact a Pendal key account manager

In an environment where yields can move sharply and inflation risks can re-emerge quickly, income positioning is less about stretching for the last basis point and more about preserving flexibility. AMY XIE PATRICK explains

• Oil shocks fuel inflation fears; yields jump
• Importance of staying flexible
• Find out about Pendal Dynamic Income Fund and Pendal Monthly Income Plus fund

EXOGENOUS shocks tend to do two things.

First, they reveal and force the unwind of extended positioning, particularly where prices have drifted too far from fundamentals. Second, they force markets to confront risks that were easier to overlook when volatility was low.

Since early March, the geopolitical escalation in the Middle East has done both.

The immediate market focus has quite naturally been on oil. Disruption to key shipping routes and the risk of a prolonged impairment to energy flows have pushed crude sharply higher and introduced a new layer of uncertainty into every major asset class.

But the oil shock has not landed on a clean slate. It has collided with a market that was already carrying crowded trades, complacent assumptions and a willingness to extrapolate benign outcomes too far.

That was visible first in precious metals. We understand the structural desire to own gold and silver in a world where traditional safe havens no longer feel as safe as they once did. But the scale of the move had begun to imply something more extreme: not merely caution, but a broad loss of faith in money itself.

Recent price action has challenged that view.

As real yields have risen and the US dollar has strengthened, gold and silver have looked a little less lustrous. In periods of real stress, investors often rediscover their preference for cash, liquidity and instruments with a known nominal value.

The more important adjustment, however, has been in bonds.

The rise in yields has been a classic 1–2 punch.

The first blow came from the oil shock itself. Higher energy prices immediately raise concern about headline inflation, especially when supply disruption appears geopolitical rather than cyclical.

The second blow came from something more uncomfortable: the shock has forced markets to reckon with the fact that, in the US at least, the disinflation story had already become stuck well before the latest escalation.

Core inflation has not been convincingly falling for some time. So rather than being treated as a short-lived nuisance, the oil move has landed on top of an already fragile inflation narrative.

This, however, doesn’t explain why real yields have risen just as hard if not harder than breakevens. The former usually tells us how the market feels about future growth prospects, while the latter tells us about the market’s inflation expectations.

I can’t explain why yields have moved in this way. One theory might be the market fearing greater government bond issuance to help consumers with higher prices at the pump. Nevertheless, this current picture is certainly not pricing in a material growth hit, let alone recession.

As for what the read-through ought to be on inflation, the jury is out. There are times when surging oil prices feed through into core inflation – the inflation in central banks’ targets, but unlike the 2022 episode, this oil shock is not coming at a time when real policy rates had just been deeply negative and there had been a massive fiscal response to a global pandemic.

The RBA chose to bring forward the May hike to March, citing the oil shock as one of the reasons that tipped the finely balanced voting scales.

This move was likely about managing inflation expectations, rather than fearing a more severe and direct pass-through from oil to inflation. Nevertheless, the market prices another 3.5 hikes to the end of 2026.

At the same time, this has not been a one-way market. Volatility itself has become part of the story. Investors have repeatedly de-risked into weekends for fear of gap risk, only to find that by Monday, selling had exhausted itself and asset prices were recovering on the slightest hint of de-escalation.

The swings in bond yields, equities and credit have at times looked disproportionate to the flow of genuinely new information.

That is often what exogenous shocks do: they magnify investor behaviour. Fear, liquidity preference and positioning can dominate fundamentals for a period of time.

For disciplined investors, that can create opportunity — but only if position sizing is sound and one is careful not to mistake violent relief rallies for genuine clarity.

The 1–2 punch also applies to private credit, although the shock was the fear of ‘Saaspocalypse’.

The first punch came from AI and software-related repricing. It reminded investors that not every business model is equally durable, and that parts of the market had been assuming a smoother earnings and refinancing path than was realistic.

The second punch has been the exposure of how much capital had already migrated into riskier parts of sub-investment grade debt, often in structures where liquidity is intentionally limited.

The issue is not that AI disruption, by itself, suddenly invalidates private credit as an asset class. It is that the shock has illuminated something that was already there: a global credit cycle that is long in the tooth, increasingly vulnerable to weaker credit metrics, and more fragile than zero-volatility marks had suggested.

Public credit has responded accordingly. Higher beta segments such as US high yield and emerging markets have been whipsawed as investors have chased hedges, reversed them, then rushed back out again on the next constructive headline.

By contrast, Australian investment grade credit has been notably resilient. Higher all-in yields have continued to attract demand, both domestically and offshore. Even so, resilience should not be confused with immunity.

Physical credit markets, especially in Australia, can feel liquid until they do not. In a more extended stress scenario, high-running yield alone will not prevent spreads from widening, nor will it guarantee buyers when investors suddenly want cash.

How we are positioning right now

Against that backdrop, our portfolio decisions have become more cautious.

In the income portfolios, we have reduced duration to 0.5yr from 1.5yrs earlier in the month. We had thought that Australian yields hitting their 2023 highs provided insulation as the monetary and fiscal policy backdrop now differs materially to the 2022 oil shock.

Still, momentum pushed on, helped by the global repricing described above. We continue to think there will come a point where bonds offer better convexity than they do now.

If the conflict drags on, markets should eventually have to pay more attention to the growth damage, not just the inflation impulse. And if the Strait of Hormuz reopens and oil normalises, at least part of the recent rise in yields should reverse.

We await more clarity to add more duration back into the portfolio, including whether oil can find its way out of the region via other routes.

It is worth keeping an eye on the Baltic shipping indices for clues. For now, the Baltic Dirty Tanker index (oil tankers) has come off its recent peak, but not nearly enough to restore confidence to the market.

On riskier assets, the profitability backdrop for equities still looks reasonably supportive in the medium term, but that has been overwhelmed in the short term by macro sentiment. In Monthly Income Plus we currently hold 12% in equities, around 4% above our usual minimum.

At the end of February, we overrode our process signals to stay at 20% and reduced our allocation to 8-10%, choosing to bank a very favourable reporting season in Australia. We have added to that allocation slightly intra-month as risk-reward signals turned more favourable after the first leg of the correction.

In Dynamic Income, we have exited our exposure to emerging markets and high yield, albeit having weathered some of the recent widening in global credit spreads.

Our bias remains cautious. We are increasingly focused on liquidity, asymmetry and the possibility that complacency in investment grade credit may yet be tested if stress in private credit begins to spill over into the broader demand for cash.

For now, we have been using bouts of positive market sentiment to reduce credit exposures in our income portfolios.

If conditions settle quickly, there will be many ways to rebuild risk. Primary markets may prove especially attractive in that scenario. But where the downside involves a rapidly narrowing window to de-risk, building and maintaining healthy cash balances remains the more valuable option.

Cash remains the greatest source of portfolio flexibility in this dynamic market environment.

In a new podcast, Pendal sustainable finance and impact investing director Murray Ackman explains what social bonds are, how to access them and how they can make a difference.

You can also listen to this podcast on Apple or Spotify

An excerpt from this podcast with Pendal’s sustainable finance and impact investing director Murray Ackman:

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More and more social bonds are issued in Australia each year, yet demand is still surpassing availability.

Social bonds are fixed-income securities with proceeds allocated to defined social outcomes such as social and affordable housing, specialist disability accommodation and education access.

In this podcast, Pendal sustainable finance and impact investing director Murray Ackman explains social bonds – what’s available, how to access them and what they do. 

Listen to this latest podcast to find out more about impact investing and the opportunities.

After a decade of US mega-cap dominance, international diversification is making a comeback. CHRIS LEES sees new opportunities emerging

• Global diversification is working again
• Opportunities shifting beyond US mega‑caps
• Learn more about the Pendal Global Select Fund

NEW opportunities are emerging across geographies, sectors, and styles — particularly in financials, communication services, and select Japanese names.

That’s the message from Chris Lees, who co-manages Pendal’s Global Select Fund.

“We believe strongly that international diversification is working again and that active selection by geography, sector, and stock characteristics matters more now than it has in years,” says Lees.

A turning point for international diversification

“There is growing evidence that we’ve moved past the long bear market in international diversification.

“More specifically, the US is no longer the only game in town. While large-cap growth stocks remain in the lead, many of the strongest ex-US performance trends are showing up in small- and mid-cap value.

“It’s a decoupling that we haven’t seen before — and one that has direct implications for our stock selection.”

Lees believes this divergence reflects more than just differences in sector make-up. It suggests that the macro landscape itself is evolving in new ways.

As a result, the portfolio is now largely focused on three distinct opportunity sets: the Americas, Europe, and Asia. Each has its own catalysts and risks and each, crucially, has new leaders emerging.

Money talks: Financials and communication services

Lees says current sector positioning in the portfolio favours financials and communication services, driven by a mix of improving fundamentals, attractive valuations, and a deliberate effort to avoid crowded trades.

Financials are back on the radar, not as legacy value plays, but as under-appreciated beneficiaries of structural change.

“We see the regulatory drag that has weighed on banks post-2008 beginning to lift, particularly in Europe,” says Lees.

That’s opened the door for credit growth to once again flow through the banking system. In regions where economic stimulus is likely to come via government spending (rather than equity markets), banks are natural intermediaries and therefore stand to benefit.

Communication services, meanwhile, offer a mix of idiosyncratic growth and low correlation to broader macro forces. These tend to be businesses whose earnings and share prices are less dependent on the economic cycle.

Big in Japan

“Some of our team’s strongest conviction ideas are in Japan,” says Lees.

Part of this stems from the normalisation of interest rates and an ongoing wave of corporate governance reform.

But, according to Lees, the deeper story is that Japan is producing genuinely unique stock-level opportunities — companies that are, in a sense, not really correlated to Japan.

“Our positioning in the region will continue to reflect a willingness to embrace these dislocations,” notes Lees.

“Recent holdings include Japanese industrials exposed to global defence trends, as well as domestic names benefitting from structural change in capital markets. Amidst the potential for a post-election policy wobble, we see volatility as a potential entry point, not a reason to step back.”

Planned obsolescence

In high-conviction active portfolios, what’s left out is just as deliberate as what’s included.

Lees says classic quality-growth names like ASML, Novo Nordisk, and LVMH, stalwarts of the last cycle, are notably absent from the portfolio.

“It’s not a reflection of business quality, but of market dynamics: in our view, these stocks have likely seen the strongest phase of their price appreciation, at least for now,” he says.

“We believe we’re moving on from what was a very narrow market to a broader market of new growth stocks in new sectors and new regions.

“This is reflected in our rising name count and a willingness to go off benchmark when justified.”

Not defensive, not aggressive — selective

Lees says rather than pick a side on the offensive versus defensive spectrum, the preference is to emphasise a third way: opportunistic patience.

“We expect more volatility ahead — not the kind that marks a bear market, but the kind that creates temporary dislocations in a still-constructive environment,” explains Lees.

“In our view, the best approach to what we’re calling a ‘volatile bull market’ is to be patient, wait for opportunities, and look for early birthday presents.

“Rather than chase rallies or sit on the sidelines, we are actively engaged, with the flexibility to take advantage of dislocations and the discipline to act when the opportunity is right.”

Broader opportunities require broader thinking

The investment team is positioning the portfolio for a more dynamic market environment, one that’s introducing new leaders across geographies and factors: European banks with earnings momentum, Japanese companies once dismissed as cyclical, and under-followed names in financials and comms services that can deliver true diversification.

“In a world that’s increasingly multipolar — economically and politically — we believe this kind of broad, active, and conviction-driven approach is well-suited to the moment,” says Lees.

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About Chris Lees and Pendal Global Select Fund

Chris Lees co-manages Pendal Global Select Fund with Nudgem Richyal. The pair have been working together in global equities investing for more than 20 years.

Chris has more than 35 years of industry experience. He joined Pendal Group’s UK-based asset manager J O Hambro Capital management (JOHCM) in 2008. Before JOHCM Chris headed up Baring Asset Management’s Global Sector team. He spent 19 years at Baring.

Find out more about Pendal Global Select Fund

In a new podcast, Pendal’s head of income strategies AMY XIE PATRICK explains why Liberation Day tariffs didn’t play out as predicted, what a K-shaped economy is and how investors should be thinking about it.

You can also listen to this podcast on Apple or Spotify

An excerpt from this podcast with Pendal’s head of income strategies, Amy Xie Patrick:

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As 2026 gears up, the economic outlook in Australia, the US and around the globe is far from clear.

There is talk of K-shaped economies, interest rates rising in some economies and falling in others, and the ever-present geopolitical challenges.

In this podcast, Amy Xie Patrick, head of income strategies at Pendal, explains why Liberation Day tariffs didn’t play out as predicted, what a K-shaped economy is and how investors should be thinking about it.

“Markets did have a very severe downturn… but why this didn’t lead to the fears of a continued bear market… is twofold… a lot of Chinese producers had to eat the cost of tariffs… and the US economy has again surprised us with how resilient it’s been all through 2025,” says Amy.

“I just wouldn’t be too fearful here at this stage buying into the K shaped economy narrative and waiting for that other shoe to drop, because if you’re too defensive… you’re sacrificing all this income, which fixed income is really about.”

Want more insight on how to navigate market uncertainty? Tune in now.