Tim Hext: Three key takeaways from Australia's

latest national accounts data

Pendal

March 2025

IT'S been five years this week since the Covid chaos emerged.

Aftershocks have kept rolling in since then. But is the Australian economy finally starting to look more "normal"?

The latest set of Australian national accounts (see below) shows Gross Domestic Product growth at 0.6% for the December quarter, suggesting that conditions may, indeed, be moving closer to normal.

Why is that? Below are three takeaways from the latest data. 

1. The consumer is back, but still cautious

The consumer is finally emerging, albeit tentatively, as a positive impact on the economy.

Household consumption grew by 0.4%, contributing 0.2% to the 0.6% overall GDP growth. The contribution had been near zero over the previous year.

Consumers finally had positive real wages growth in 2024 (3.2% wage growth versus 2.5% inflation).

Consumers also spent some of the Stage 3 tax cuts since July. We estimate that around 25% was spent and 75% saved, helping the savings rate to climb to 3.8% from below 3% a year ago.

2. Governments are still a large driver of GDP. Will they pull back further to make room for the consumer?

Government consumption grew by 0.7% in Q4, driven largely by the states. This is at least moderating from near 1.5% growth a quarter earlier.

Government investment also moderated but remains high at 1.8% over the quarter. Overall, the public sector contributed 0.2% to the 0.6% growth.

The government needs to keep moderating spending and investment if the re-emerging consumer is to avoid causing inflationary pressures.

In many areas of the economy, the private and public sectors compete for supply of labour, capital and goods.

3. Private investment remains weak, adding to poor productivity

Private investment rose only by 0.3% in the quarter. Business investment is showing some signs of life, but dwelling investment is falling -- not helped by high rates.

There are, as always, different stories in different sectors. But the overall picture is productivity continuing to flat-line.

GDP per hour worked fell again and is 1.2% lower over the year.

The focus on Australia's poor productivity is becoming a bigger issue.

Everyone has their reasons for it and different lobby groups will shift blame, promoting their own solutions (which normally involve government hand-outs).

However, I did come across the graph below courtesy of Minack Advisors. 

 Put simply, as our capital-to-labour ratio has fallen, so has labour productivity.

Net investment to GDP is around the lows of the past 50 years against labour force growth at the highs (courtesy of immigration and participation).

Overall, the latest today's national accounts report offers some hope of GDP moving back to the 2% to 2.5% the RBA is looking for.

However, unless we can start improving productivity, we will be running to stand still.

Author: Tim Hext

Funds operated by this manager:

 This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at December 8, 2021. PFSL is the responsible entity and issuer of units in the Pendal Multi-Asset Target Return Fund (Fund) ARSN: 623 987 968. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient's personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information 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 is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. 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. Any projections are predictive only 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. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com

Trump's 'Period of Transition': Economic Reset or Market Risk?

JCB Jamieson Coote Bonds

March 2025

Funds operated by this manager:

CC Jamieson Coote Bonds Active Bond Fund (Class A), CC Jamieson Coote Bonds Dynamic Alpha Fund, CC Jamieson Coote Bonds Global Bond Fund (Class A - Hedged)

Chris Gosselin, CEO of Australian Fund Monitors, speaks with Monik Kotecha Chief Investment Officer at Insync Fund Managers. Insync Fund Managers operate two funds, the Insync Global Capital Aware Fund (hedged) and the Insync Global Quality Equity Fund (unhedged). The two funds have the same strategy, the only difference being that one is hedged and the other is unhedged.

The Insync Global Capital Aware Fund has a track record of 15 years and 5 months and has underperformed the All Countries World (AUD) benchmark since inception in October 2009, providing investors with an annualised return of 11.16% compared with the benchmark's return of 11.99% over the same period. At the same time, the Insync Global Quality Equity Fund has a track record of 15 years and 5 months and has outperformed the All Countries World (AUD) benchmark since inception in October 2009, providing investors with an annualised return of 13.06% compared with the benchmark's return of 11.99% over the same period.

Funds operated by manager:
Insync Global Capital Aware Fund
Insync Global Quality Equity Fund

Market Commentary - February

Glenmore Asset Management

March 2025

Funds operated by this manager:

Glenmore Australian Equities Fund

Chris Gosselin, CEO of Australian Fund Monitors, speaks to Nicholas Chaplin, Director and Portfolio Manager at Seed Funds Management. 

The Seed Funds Management Hybrid Income Fund has a track record of 9 years and 5 months and has outperformed the Solactive Australian Hybrid Securities (Net) benchmark since inception in October 2015, providing investors with an annualised return of 6.46% compared with the benchmark's return of 4.83% over the same period.

Funds operated by this manager: Seed Funds Management Hybrid Income Fund

The future of healthcare: Trump, policy and innovation

Magellan Asset Management

March 2025

Is the healthcare sector ready for transformation amidst uncertainty? Investment Analyst Wilson Nghe explores the current state of the healthcare sector, highlighting the impact of Trump's policy initiatives and the surrounding political noise. Wilson explains that increased uncertainty in the sector adds to higher volatility and regulatory risk, which is crucial in assessing the healthcare sector's outlook and risks. Despite these challenges, there are significant opportunities in healthcare innovation, with companies like Stryker at the forefront of medical technology advancements, and with the rise of GLP-1 therapy development.

Funds operated by this manager:

Magellan Global Fund (Hedged), Magellan Core Infrastructure Fund, Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged)

Important Information: 

Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('Magellan') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation.  This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to a Magellan financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material.  Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. No representation or warranty is made with respect to the accuracy or completeness of any of the information contained in this material. Magellan will not be responsible or liable for any losses arising from your use or reliance upon any part of the information contained in this material.

Any third party trademarks contained herein are the property of their respective owners and Magellan claims no ownership in, nor any affiliation with, such trademarks.   Any third party trademarks that appear in this material are used for information purposes and only to identify the company names or brands of their respective owners. No affiliation, sponsorship or endorsement should be inferred from the use of these trademarks. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan.

How to Find the Best Stocks After a Market Correction

Marcus Today

February 2025

Why Timing the Bottom is About Sentiment, Not Fundamentals

If you ever say, "I can't buy it, it's gone up 10% in a week," you will struggle as an investor. If you think, "It's up 100%, I've missed it," you doom yourself to conservatism. Chickens don't make money.

You will never find a ten-bagger if you're selling at a 10% gain. Thirty-five stocks in the All Ordinaries have more than doubled in the last year, and 90 are up more than 50%. Do not sell because something has gone up--sell because it's going down.

In a recovery, the stocks that rise the fastest are often the ones that fell the hardest. If the market has already started bouncing, you must buy stocks that have already gone up. Sometimes, you have to buy stocks that have gone up a lot.

The Key Signs of a Market Bottom

No one knows exactly when corrections will come. Those who seemed to predict them were only right in hindsight. They made noise at the right time, and then, after the fact, claimed victory.

You can't predict a market bottom before it happens--but you can recognise it when it arrives. The key signs to watch for:

• Extreme negative sentiment--when the herd has given up.
• A sudden change in market commentary--the shift from panic to cautious optimism.
• A big up day or week after heavy selling--a key signal that the bottom may be in.
• Volatility dropping and buying volume increasing--showing that money is flowing back into stocks.

The best way to time a top or bottom is to read Marcus Today. Not kidding!

Using Market Sentiment to Buy at the Right Time

You Can't Predict the Bottom - But You Can React to It

Do not think you can be clever enough to predict the bottom before it happens. You can't predict the big sell-offs, just like you can't predict the exact turning point. But you can watch the signs and act decisively.

The stock market has an average gain rate of 9% per year. If the market has run well beyond that pace, it becomes vulnerable. But don't act based on warning signs alone--wait until the correction begins, then react.

Yes, be more alert when things get ridiculous, but still--wait for the move. When warning signs turn into a major sell-off, be ready to be decisive.

Indicators That Show a Recovery is Starting

The moment to buy is not when things look cheap - it's when sentiment turns. Fundamentals won't tell you when to buy.

Instead, watch for:

• Large up days on high volume--big money stepping back in.
• Insider buying and institutional fund flows increasing--smart money making its move.
• Riskier assets leading the bounce--growth stocks and speculative names rebounding first.

At extreme moments, the market lifts all boats on the way up, just as it sinks them on the way down. If you're trying to time the market, watch the herd--don't follow it.

Stock Selection After a Correction

What Stocks Rebound the Fastest?

Catching the bottom of a correction is all about sentiment.

When everyone has lost faith in the market and is doing 200 miles an hour with their hair on fire, they generally also lose sight of fundamentals.

That's an opportunity. But you don't buy on the numbers--you buy on sentiment changing for the better.

You need to spot that, and the way to do it is the same way you spot the top: On the balance of probabilities.

If the market has fallen a lot, has a big up day or week, and the tone of the commentary is changing for the better, on the balance of probabilities, that is a bottom.

Watch the herd, don't join the herd.

Avoid These Stocks After a Market Crash

Fundamentals are useless when it comes to timing the market. It's why value investors can never time the market--a PE ratio will never tell you when to sell or buy.

Sentiment watching (price watching) gives you a much better chance.

At extreme moments, the market drives all--sinks all boats, lifts all boats. Focus all your attention on identifying the "Pivot Point" in the market.

In corrections, the woods are on the move--forget the trees until the forest is going up again.

It's no good saying "NAB is cheap" when the GFC is starting.

When the market is crashing, everything will look cheap halfway through the sell-down--but you don't buy falling stocks because they're cheap.

That's for Buffett quoters.

You can't time the market on fundamentals.

Lessons from Past Market Crashes

What History Teaches About Buying the Dip

Stock selection comes second to the market.

In a recovery, stock selection is where you will make the most money--but not until you get the market right first.

If you get that right, you'll make money in everything.

Market first, stocks second.

Case Study: How Stocks Recovered from the GFC and COVID Crash

The recovery will come fastest and hardest in the stocks that have suffered the most extreme sentiment swings.

In a recovery, it is not the stocks with the best fundamentals that recover the best (far from it).

It is the stocks that involve the most sentiment in the price--often the stocks with no fundamentals but the most growth prospects.

The stocks that people made the most money in before the top, and lost the most money in during the correction.

They rebound the earliest, and they rebound the most.

The money is in identifying and timing the extremes of sentiment.

Spend the time in cash listing the "fad" stocks you're going to buy in the recovery.

It's not NAB.

Final Thought: Corrections Are Your Greatest Opportunity

At the end of the day, market corrections are not a threat--they are an investor's best friend. Instead of fearing them, welcome them. They provide the chance to sell at the top and buy at the bottom.

If you buy into the industry narrative that "timing the market is impossible," you'll miss some of the best opportunities of your investing life.

Corrections create wealth for those who know how to take advantage of them. The only question is--will you?

Author: Marcus Padley

Funds operated by this manager:

Marcus Today Equity Income SMA, Marcus Today Growth SMA

On the Road with Alphinity: Santos Carbon Capture and

Storage Project in Moomba, South Australia

Alphinity Investment Management 

March 2025

Towards the end of January, Jess was invited to the official opening of the Moomba Carbon Capture & Storage Project (CCS) at Santos' Moomba Gas Plant in northeastern South Australia. The project is designed to store up to 1.7 million tonnes of CO2 per year, which is equivalent to 10% of South Australia's annual CO2 emissions, and is one of the largest operational CCS projects in the world. Santos has also stated that this is one of the lowest cost CCS projects globally, with a lifecycle cost of less than US$30 per tonne of CO2.

The Cooper Basin, where Moomba is located, covers 130 square kilometres and stretches 500 kilometres from east to west. The gas field is twice the size of Tasmania and the actual size of England. Out there, the operational team need to bring in or generate everything needed. They generate all the water and bring in the food needed to support 1000 people working on the fields at any one day. There are 150 separate gas fields and 1,000 producing gas wells.

A group of about 80 people, including staff, project partners and other key stakeholders, flew in for the day to see the new facility and hear about the achievements of the project team. The site tour was brief, and they were only able to view it from outside the fence. Still, she gained a strong understanding of what a CCS project actually looks like.

Essentially, it is a bunch of pipes and pumps in a shed, and Jess was struck by just how simple it all was. In fact, there is nothing that special at the site at all. This is not to downplay the achievement of the company in getting this project up and running, or the capital that has been spent building the pipeline infrastructure across a gas field the size of England. However, in the end, the technology and infrastructure involved are relatively simple. CO2 is captured at the Moomba gas plant and fed through dehydration units, it then goes through a four-stage modified natural gas compressor, and finally the CO2 itself is piped out to five injection wells using a mild steel pipe.

First injection at Moomba started mid-2024 and, so far, the team has achieved 98% effectiveness. The main limitation is during days of extreme heat, as the processing power of the compressors needs to be reduced; other than that everything has been working as expected. From here, the focus moves to monitoring and making sure that there are no adverse impacts from injecting CO2 back into the empty gas reservoirs.

At this point, there is only one other working CCS project in Australia, which is at Gorgon off the coast of Western Australia. Chevron's Gorgon CCS plant is the largest in the world with the ability to store 4 million tonnes of CO2 per year. Its plant injects the CO2 into a giant sandstone formation two kilometres under Barrow Island. Both projects have been heavily criticised by environmental groups, some investors, and some community members. CCS is still controversial. However, from what we saw during the site visit , this may well be a turning point for CCS in Australia.

CCS can be quite expansive to achieve but for Moomba, a few unique attributes has kept the lifecycle cost relatively low. Firstly, CO2 separation was already taking place at the site and secondly, transportation over long distances was not needed. Unlike other developments where hundreds of kilometres of pipelines might be needed, in this case only one 50km pipeline was built. This is the first of a number of CCS projects that Santos is proposing. Although the jury is still out as to whether the economics will work as well as they do at Moomba, the outlook is positive.

Funds operated by this manager:

Alphinity Australian Share Fund, Alphinity Concentrated Australian Share Fund, Alphinity Global Equity Fund, Alphinity Global Sustainable Equity Fund, Alphinity Sustainable Share Fund

This material has been prepared by Alphinity Investment Management ABN 12 140 833 709 AFSL 356 895 (Alphinity). It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Any projections are based on assumptions which we believe are reasonable but are subject to change and should not be relied upon. Past performance is not a reliable indicator of future performance. Neither any particular rate of return nor capital invested are guaranteed.

Sports Investing: A Rising Global Opportunity

    Altor Capital

March 2025

The world of professional sports is undergoing a seismic shift, presenting unprecedented opportunities for investors. Previously the exclusive domain of billionaires, sports franchises have emerged as a unique and rapidly growing asset class, driven by robust business models, increasing media rights valuations, and the global appeal of sports as entertainment.

The Explosive Growth of Sports Investments

Sports organisations are becoming increasingly attractive to investors due to their resilient revenue streams, monopolistic market dynamics, and cultural significance. Unlike traditional industries, professional sports have proven to be non-cyclical and resistant to economic downturns. For example, just after the 2008 financial crisis, valuations of major American sports leagues such as the NFL, NBA, MLB, and NHL dropped only 1% collectively-the sole negative year in the past two decades (*Statista).

Key drivers of this growth include:

• Recurring Revenue Streams: Sports teams generate 60-80% of their revenue through annual contracted value (ACV) streams such as media rights (3-10 years), sponsorships (1-2 years), and long-term stadium agreements (up to 30 years).
• Monopolistic Characteristics: Professional teams operate in markets with limited competition, benefiting from regional exclusivity.
• Compelling Entertainment Content: Sports dominate media consumption, with 95 of the top 100 media events and 85 of the next 100 being sports-related.

According to the Ross-Arctos Sports Franchise Index sports team valuations in the US have compounded at over 13% p.a. for over 60 years (*RASFI). Valuations from 2000 have outperformed the S&P500 by over 6x.

The Media Rights Revolution: A Catalyst for Valuation Growth

The growth in media rights deals is one of the most significant drivers of increased valuations for sports franchises. The NFL's annual media rights revenue reached US$10b in 2024, while the NBA secured an 11-year deal worth US$76 billion. This trend has propelled the average value of NBA teams to double since 2021 (*Sportico).

In Australia, the sports market is following a similar trajectory. The National Basketball League (NBL), while not in the same scale as the NBA or NFL, has seen remarkable growth in fan engagement and viewership. By leveraging media rights and innovative broadcast strategies, NBL franchises have a unique opportunity to replicate the success seen in U.S. leagues.

Strategic Ownership: A Key to Unlocking Value

Investors in sports teams have historically faced challenges related to minority ownership stakes, which often come with limited control over operations. In the U.S., minority stakes have traded at discounts of 10-40%. However, as institutional demand grows, Goldman Sachs predict these discounts will diminish over the next decade. Full operational control allows owners to maximize a team's potential, optimizing revenue streams such as ticket sales, sponsorships, and merchandise.

Case Studies: Evidence of Success in Sports Investments

Several recent examples highlight the transformative impact of strategic investments in sports teams:

• Milwaukee Bucks: Former co-owner Marc Lasry sold his stake shortly before a new NBA media rights deal, benefiting from a valuation already pricing in the anticipated revenue growth.
• Kansas City Current: The National Women's Soccer League (NWSL) team's revenue jumped from US$8 million to US$30 million in a single year, driven by a new stadium and increased fan engagement (*SBJ).
• WNBA: The league's media rights deal recently quadrupled from US$50 million to US$200 million annually, reflecting explosive growth in women's sports (*The Guardian).
• Inter Miami: The club doubled its revenue to US$118 million after signing Lionel Messi, with growth seen across multiple facets, including merchandise, tickets, media rights, and sponsorships (*ESPN).

The Rise of Women's Sports

Women's sports are experiencing explosive growth, with increasing participation rates and fan engagement. The National Women's Soccer League (NWSL) has seen a dramatic rise in viewership, leading to a media deal worth US$240 million over four years-a significant increase from its previous deal. Similarly, the WNBA's latest media rights agreement is worth a staggering US$200m per season, considerably higher than their previous US$50m per season (*The Guardian) further solidifying women's sports as a key growth segment.

Speak to our team today to discover how private credit can transform your business financing.

Ownership of Venues: Unlocking Additional Revenue Streams

Owning venues provides significant opportunities to generate revenue beyond sports. Many U.S. team owners utilise their stadiums to host concerts, festivals, and other entertainment events during the offseason. This model has proven highly lucrative and offers a roadmap for other markets, including Australia, to diversify income streams.

Australia vs. the U.S.: Comparative Growth Potential

While Australia's sports market is smaller than that of the U.S., it is growing rapidly. Using basketball as an example, the NBL has benefited from increased international visibility and talent development, positioning it as the second most important basketball league in the world.

The relationship between the NBL and NBA has strengthened significantly in recent years, providing a platform for growth and collaboration. The NBL has become a key developmental pathway for aspiring NBA players, with athletes like LaMelo Ball and Josh Giddey using the league as a springboard to NBA success. This connection has elevated the NBL's profile internationally, attracting talent, sponsorships, and media attention.

Additionally, preseason games between NBL and NBA teams have fostered mutual recognition and enhanced fan engagement. These collaborations not only highlight the NBL's growing competitiveness but also position it as a league capable of nurturing top-tier talent. As this relationship deepens, it creates further opportunities for investors to capitalize on the NBL's rising prominence and its alignment with the NBA's global brand.

In a significant step toward strengthening this connection, the NBA recently announced its return to Melbourne for two preseason games in 2025, marking another milestone in the growing relationship between Australian and U.S. basketball (*NBA) These games will provide Australian fans with firsthand exposure to NBA talent while further integrating the NBL into the global basketball ecosystem. This reinforces the investment potential in Australian basketball, as its alignment with the NBA continues to drive visibility and commercial opportunities.

*statista - www.statista.com/statistics/202758/franchise-value-of-us-sports-teams/

*RASFI - michiganross.umich.edu/faculty-research/partnerships/ross-arctos-sports-franchise-index

*Sportico - www.sportico.com/leagues/basketball/2024/nba-team-values-warriors-knicks-lakers-lead-1234820970/

*SBJ - www.sportsbusinessjournal.com/Articles/2024/12/02/cpkc-stadium-kc-current

*The Guardian - www.theguardian.com/sport/article/2024/jul/17/wnba-revenue-set-to-surge-with-200m-a-year-broadcast-rights-deal#:~:text=The%20WNBA%27s%20current%20media%20deals,of%20the%20median%20NBA%20salary.

- www.theguardian.com/sport/article/2024/jul/17/wnba-revenue-set-to-surge-with-200m-a-year-broadcast-rights-deal#:~:text=The%20WNBA%27s%20current%20media%20deals,of%20the%20median%20NBA%20salary.

*ESPN- www.espn.com.au/football/story/_/id/41293395/inter-miami-made-big-bet-messi-paying-off

*NBA - www.nba.com/news/nba-australia-melbourne-games

Funds operated by this manager:

Altor AltFi Income Fund, Altor Emerging Growth Fund