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The Point
Quick, actionable insights for investors
Sep 4
Five major ASX reporting season themes | Aussie spending and rate cuts | The countries benefitting from a weaker US dollar
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Aussies are spending again. But what does it mean for rate cuts?
AUSSIE consumers are spending again – that’s the main message from the June-quarter GDP data out this week.
Overall, growth was slightly higher than expected at 0.6% versus a 0.5% forecast. Annually we are 1.8% stronger than a year ago.
But increased consumer spending comes through as a clear trend, notes Pendal’s head of government bonds Tim Hext.
Despite last year’s tax cuts and February’s rate cuts, for a while it seemed consumers were more interested in saving than spending.
However, household spending rose 0.9% in the last quarter, led by a 1.4% rise in discretionary spending.
Now rate-cut expectations have dropped from 100% chance of one cut by November to 90%.
“It does all feed into the idea that the RBA has time and optionality on its side,” says Tim.
“If the consumer gets more confident from here, some may ask if any more rate cuts are needed.”
How to identify emerging markets benefitting from a weaker US dollar
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How to identify emerging markets benefitting from a weaker US dollar
A weaker US dollar is creating support for emerging-market equities – but not all countries will benefit equally.
The US Dollar Index – which measures the USD against other major currencies – is down about 10 per cent this year.
EM returns have historically been strongest when the US dollar is weak, because servicing US-dollar debt becomes cheaper; domestic purchasing power in EMs improves; and cheaper imports help keep inflation under control, creating room for rate cuts.
Still, while EM performance lifts as the US dollar weakens, the effect is uneven and investors should be discriminating in country selection, cautions Pendal’s EM team.
Economies with a current account deficit – common in Latin America and South-East Asia – benefit most from cheaper borrowing, lower imported inflation and stronger consumer demand.
But big exporters that run a surplus such as Taiwan and Korea can face headwinds as their products become more expensive in US-dollar terms.
Crispin Murray: What’s driving the ASX this week?
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Crispin Murray: What’s driving the ASX this week?
Pendal identified five major themes this ASX reporting season.
1. Overall earnings were okay, with similar trends to February in terms of misses and beats. A third of companies beat by 5% or more and 22% missed.
2. Stock volatililty reached new highs on result days, driven by the tone of messaging and revisions. Almost a third of companies experienced stock moves more than three standard deviations away from their average on reporting day.
3. Rating changes were the most material driver of returns. The biggest re-ratings were generally stocks beginning to stabilise or those that affirmed their status as safe havens.
4. Disappointing large caps were hit harder than smalls. The average two-day relative return for industrial large caps that missed consensus EPS by more than 5% was -7.2% for the ASX 100, versus -3.8% for small caps.
5. Domestic stocks generally performed better than internationally-exposed companies.
Amy Xie Patrick: What the Fed’s shift from inflation to employment means for investors
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Amy Xie Patrick: What the Fed’s shift from inflation to employment means for investors
A shift in focus from inflation to employment hints at a likely rate cut in September observes Pendal’s head of income strategies AMY XIE PATRICK
In her latest article, Amy explains how she is positioning Pendal’s income funds in response to these and other global factors.
Pendal profile: Meet Australian equities analyst and portfolio manager Elise McKay
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Pendal profile: Meet Australian equities analyst and portfolio manager Elise McKay
AUSTRALIAN equities have the potential to offer investors a compelling trio of benefits, argues analyst and portfolio manager Elise McKay.
In this video, Elise explains how the Pendal investment process helps her team identify and take advantage of opportunities in Australian shares.
Latest updates from our fund managers
Income and Fixed Interest
Aussies are spending again. But what does it mean for rate cuts?
September 3, 2025
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Emerging Markets
Emerging markets: Look past commodity exports to countries with strong domestic demand
July 26, 2023
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These podcasts are for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. They have been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on the information, consider its appropriateness having regard to their or their clients’ individual objectives, financial situation and needs. The information is not to be regarded as a securities recommendation.
The information in these podcasts may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this presentation is complete and correct, to the maximum extent permitted by law neither Pendal nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information.
Any projections contained in these podcasts are predictive and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections.
Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance.
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Income and fixed interest wrap: latest outlook for inflation, rates and bonds
The Reserve Bank has revised its end-of-year inflation forecast to 4.5% – where it was in May. Are they right?
Pendal’s income and fixed interest team expects Q4 inflation between 0.7% and 0.8%, meaning the annual figure would be closer to 4.2%.
“If we’re right, then the November rate hike wasn’t needed,” says head of bond strategies Tim Hext.
“More importantly, this makes the chance of a February hike very low.
“Beyond February, inflation should remain sticky around 0.8% to 0.9% a quarter, meaning rate cuts are off the table for most of 2024.”
Pendal roughly agrees with the RBA’s expectation of a 3.6% number by mid-2024.
“By the middle of next year, US rate cuts may well be on the table, helping bonds find more support.”
In Australia, all eyes will be on Santa’s stocking to see the impact of the pre-Christmas hike.
Bond yields remain attractive on a medium-term basis, says Tim.
Nov 16
The trend of the year | Bull and bear cases | Asset allocation for the ‘old normal’ | Value in value investing | What’s unique about Aussie bonds
Moderating inflation is the trend of the year. Here’s what it means for investors
Moderating inflation is now the trend of the year, says Anna Hong, an assistant PM with Pendal’s income and fixed interest team.
The US CPI increased 3.2% in the year to October – down from 3.7% annualised in September.
While Australia remains higher (we’re probably six months behind the US says Anna), we can see light at the end of the tunnel.
“Across the globe, economies have been seeing inflation come down as the resumption of supply chains eased price pressure on goods.
“This time around the inflation slowdown was much more broad-based, rather than just a goods-fuelled moderation.”
With moderating inflation as the trend of the year, investors can be more assured in their bond allocation, Anna argues.
“On balance, we believe Australian bonds should provide better risk-reward ahead.”
Crispin Murray: What’s driving Aussie equities this week
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Crispin Murray: What’s driving Aussie equities this week
There are two views on the medium-term outlook, says Pendal’s head of equities Crispin Murray.
The bears expect material weakening or recession in the US next year due partly to the lagging effect of monetary tightening on longer debt duration.
Unemployment might rise materially, affecting consumption and bringing forward rate cuts. Corporate earnings could fall and equity markets de-rate.
The bulls believe the peak in financial conditions tightening has passed and now presents a lighter headwind.
In this scenario, core inflation falls quickly, unemployment stays low and GDP growth resilient, reflecting a cycle distorted by the pandemic. Wages would ease off while consumption remained supported.
Falling inflation could prompt rate cuts, providing protection against a slowdown.
Nov 9
Opportunities emerge in China | How rates are impacting private credit | Promising mid-cap themes | Rate pause expected
Aussie equities: AI and cloud computing drive data centre stocks
Elsewhere in this newsletter, Pendal PM Brenton Saunders nominates data centre stocks as one of three thematic opportunities in the mid-caps space.
Pendal analyst Elise McKay agrees, having just returned from a US trip where she met with participants across the data supply chain.
Elise believes established data centre (DC) owners with existing capacity are best-placed to benefit from growing demand due to the time it takes to acquire land, undertake construction and manage power requirements and other complexities.
“I’m very bullish on the outlook for data centres,” Elise says.
The accelerating shift to the cloud is driving demand. Global demand is forecast to triple in the next five years, according to research from Cushman & Wakefield. Generative AI is adding to that shift.
“There’s strengthening demand for DCs and supply is tightening,” Elise explains.
In some major DC locations, such as Northern Virgina in the US, vacancy rates are at one per cent. In Australia it’s closer to 17 per cent.
Emerging markets: Where to hunt for opportunities in China
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Emerging markets: Where to hunt for opportunities in China
Parts of China’s equity market are showing opportunities at current price levels, says emerging markets portfolio manager James Syme.
James believes the EM equities asset class is dominated by bottom-up investors who, in the aggregate, alternatively underreact and then overreact to top-down developments.
“Sometimes over-reaction can occur to the downside, when groups of stocks within markets sell-off indiscriminately to unjustified levels on top-down concerns.
“We believe that’s happening in parts of the Chinese equity market – and that real opportunities are being presented at these price levels.”
Does that mean Chinese equities are set to outperform the broader emerging market benchmark?
No, he says. “The property sector continues to struggle and the loss of market share in US imports will not easily be regained.”
But there are opportunities, James believes.
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