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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.
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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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Nov 2
Investing in a higher-rates world | Time to consider bonds | AI’s not done yet | Watch-out on capital-intensive stocks
Aussie equities: Why you should be scrutinising capital-intensive stocks
Equities investors have rightly kept a close eye on rising operating costs during the recent period of high inflation.
Now it’s time to pay greater attention to capital expenditure inflation, says Anthony Moran, an analyst with Pendal’s Aussie equities team.
“Any company with a fair bit of capital intensity will be exposed to price rises in coming periods,” argues Anthony.
“If you’re a capital-intensive company, capex inflation is going to erode returns, especially if you don’t have pricing power,” he explains.
“If you’re in an industry where there are just a few manufacturers and they all have the same cost base, maybe they can pass through the higher costs.
“But if it’s an industry like steel, which is a globally traded commodity, there is no pricing power.”
Elise McKay: Don’t be fooled into thinking AI has run its course
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Elise McKay: Don’t be fooled into thinking AI has run its course
Sentiment has dipped on the US mega-tech stocks, but it would be a mistake to believe the AI theme has run its course.
That’s the view of Elise McKay, an analyst with Pendal’s Aussie equities team, who’s just returned from a US tour where she met with dozens of companies.
AI was a topic in almost every meeting, Elise says.
“AI is not a fad. Economic wobbles and geo-political uncertainty may have contributed to a recent sell-off in the Nasdaq.
“But there’s strong evidence that over the longer term generative AI will have a big impact across the business landscape.”
Today’s winners may not be the winners of the future though, Elise says.
For example, Nvidia is now an AI infrastructure winner because its chips are in high demand for resource-intensive AI training.
But there are signs market growth is shifting from training to “inferencing”, which requires less computing power.
Pendal’s weekly fixed interest wrap
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Pendal’s weekly fixed interest wrap
Another week, another rise in yields; Australia the worst developed market
AT THE time of writing, Australian 10-year bond rates were up another 0.24% for the week – despite little hard data to explain it.
True, the Reserve Bank is expected to hike rates next week. But long bonds have underperformed short rates, which is not what you’d expect.
Interestingly, Australia was by far the worst performer among global markets. Europe was largely unchanged and the US was only 0.05% higher.
So we’re left with various possible explanations — though if truth be told, the scale of the selloff is a surprise to all.
Oct 26
What to expect on Cup Day | Outlook for China stimulus | Stock-picking in a higher-for-longer world | The wider impact of GLP-1 drugs
Tim Hext: Inflation is higher. But is it ‘materially’ higher? That’s the big question
After yesterday’s strong inflation numbers, focus now turns to the RBA’s Nov 7 meeting.
The rates decision rests on the RBA’s definition of ‘materially higher’ and ‘low tolerance’, says Pendal’s head of bond strategies Tim Hext.
RBA minutes mention a “low tolerance” to upside inflation surprises. Meanwhile governor Michelle Bullock has said the board won’t hesitate to hike if there’s a “material revision” to the inflation outlook.
“What is material?,” ponders Tim.
Q4 inflation is expected at around 0.9%, leaving headline inflation at 4.3% and underlying at 4.1%, he says. That would be about 0.2% higher than the RBA’s last forecast.
We’ll get a sense of the latest forecast (due Nov 10) with the rates decision.
“At these levels there is no clear trade, since it will be line ball,” says Tim.
“If I’m pushed, I think Bullock will be keen to show her inflation-fighting credentials by putting in one hike, even though she was probably hoping today’s number would let her off the hook.”
Aussie equities: where to hunt for category winners in this economy
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Aussie equities: where to hunt for category winners in this economy
THE global economy has shown resilience in recent months – but there are now signs it is gradually slowing, along with consumption.
“We are moving from single-digit growth to single-digit declines,” says Pendal equities analyst Anthony Moran.
“In this environment investor mindsets change from being comfortable about resilient demand to thinking about downside risks.”
The shift has been particularly prevalent in industrials, which have underperformed other sectors, says Anthony.
“Investors don’t need to put all their money into hyper-defensives because things may not be that bad.
“Look for companies that are going to grow above their category, or are able to grow market share, particularly if they are trading at attractive valuations.”
Oct 19
Middle East impact on markets | 5pc bonds | Asset allocation review time | Green metals drive resources | New biodiversity guidelines | Why Indonesia trumps China
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