When the Map Changes Mid-Journey

Alphinity Investment Management 

April 2026

4-minute read

The macro has taken over. Here's how we're navigating it

Markets don't wait for certainty. They reprice the expectation.

After a strong run into February 2026, led by Materials and Banks, two of the most economically sensitive corners of the Australian market, the landscape has shifted quickly. The Middle East conflict has moved markets from micro to macro almost overnight, raising a familiar and uncomfortable question: what happens to growth from here?

The short answer is that it likely slows; certainly, from what expectations were only a few months ago. The longer answer depends heavily on one man, and as anyone watching closely will attest, predicting Trump in the space of a single news cycle is ambitious, never mind longer term.

The Australian backdrop is more complicated than most

Australia entered this period with a problem most markets didn't have to the same extent: a persistent lift in underlying inflation that had already forced the RBA's hand. Two rate rises into a new cycle, and central bank credibility was already being tested. Consumer confidence had begun to wobble, and spending was pulling back even before the uncertainty and inflation caused by the war was a risk.

Now layer on a material rise in petrol prices, supply-side shocks across energy and key commodities, and growing uncertainty about where this end -- and you have a consumer likely under genuine pressure.

The RBA finds itself in a difficult position. Raise rates further to fight inflation and you risk choking an already potentially slowing economy. Hold and you risk losing the inflation fight altogether. Neither is comfortable. This is the definition of a stagflationary environment, and the risks are starker in Australia than in many developed markets that this takes hold. The Federal Government's budget will also play a role in dictating how much the interest rate lever will need to be pulled.

We don't want to overstate the negatives -- there is still momentum in parts of the economy, companies are on average conservatively positioned, and household balance sheets retain meaningful buffers. But slower growth is now more likely, and the risk distribution has skewed to the downside. The chance of a policy misstep has increased.

What we're watching

Earnings. Full stop.

Australia had a genuinely strong six months of earnings upgrades heading into this period. That momentum is now at risk. We're watching closely for where cost pressures and supply chain disruptions begin to feed through, particularly across the large-cap miners and banks, which have driven the bulk of recent earnings momentum.

The good news: market valuations have reset to more reasonable territory (ASX200 & ASX300 now at 17.5x PE forward vs recent highs of 20x). That cushion matters. But it disappears quickly if earnings downgrades follow. We're not there yet, but we're watching.

How the portfolio is positioned

With genuine uncertainty elevated, this is not the environment for bold, concentrated bets. Instead, we've been making deliberate, measured tilts -- reducing exposure to emerging risks and adding to areas with more resilient earnings

• • We've taken profits in global and domestic cyclicals -- metals and mining, discretionary, and banks -- where earnings are most exposed to an economic slowdown. In their place, we've added to defensive earnings streams: Staples (Woolworths), Telecommunications (Superloop, Telstra), and Insurance (Insurance Australia Group, Medibank).

• On Energy, we remain broadly neutral but with a slight tilt toward spot-price and refiner exposure (Woodside and Ampol). Even if the conflict resolves quickly, structural damage to supply infrastructure suggests oil prices are unlikely to return to recent lows anytime soon.

• We retain a modest overweight to Metals and Mining, but well below recent highs and highly selective in where we're positioned. Where commodity deficits have genuinely widened -- aluminium being a clear example, with the supply gap widening materially since January -- we see better-supported prices and potential for more earnings upgrades (Newmont, Rio Tinto, BHP, Alcoa).

• REITs remain underweight, with a preference for Charter Hall within the sector. Its high-quality portfolio and strong balance sheet provide relative insulation in a higher-for-longer rate environment relative to the broader REIT sector.

• Our Technology exposure, while modest, stays at the defensive end of the spectrum -- businesses with durable, recurring earnings streams (Technology One and Life360).

• The domestic consumer remains at risk with demand growth clearly slowing. Both Business and Consumer confidence slumped during March'26 to levels last seen during the Covid pandemic. We're underweight the Consumer overall -- more so in Discretionary, offset somewhat by an overweight in the more defensive Staples (Woolworths).

• We've moved to small underweight on Banks, shifting exposure a bit toward Insurance -- a less beta-sensitive part of the sector. Bank valuations look stretched; ex-CBA the picture improves, but recent market moves make even a relative value argument difficult to sustain.

The bottom line

This is an autumn for patience. The macro uncertainty is real, and we won't pretend otherwise. But uncertainty is not the same as paralysis -- it's an invitation to think carefully about where earnings are genuinely supported and where they are not.

We are tilting. Slowly, purposefully. And we will keep tilting in the direction the evidence points.
As always, we'll let the earnings do the talking.

Funds operated by this manager:

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

10k Words

Equitable Investors

April 2026

(2-minute read)

Funds operated by this manager:

Equitable Investors Dragonfly Fund

Disclaimer

Past performance is not a reliable indicator of future performance. Fund returns are quoted net of all fees, expenses and accrued performance fees. Delivery of this report to a recipient should not be relied on as a representation that there has been no change since the preparation date in the affairs or financial condition of the Fund or the Trustee; or that the information contained in this report remains accurate or complete at any time after the preparation date. Equitable Investors Pty Ltd (EI) does not guarantee or make any representation or warranty as to the accuracy or completeness of the information in this report. To the extent permitted by law, EI disclaims all liability that may otherwise arise due to any information in this report being inaccurate or information being omitted. This report does not take into account the particular investment objectives, financial situation and needs of potential investors. Before making a decision to invest in the Fund the recipient should obtain professional advice. This report does not purport to contain all the information that the recipient may require to evaluate a possible investment in the Fund. The recipient should conduct their own independent analysis of the Fund and refer to the current Information Memorandum, which is available from EI.

Hedge Clippings | 08 May 2026

This week saw the RBA meet most market observers' expectations by increasing rates by 0.25% - the second such move in a row, taking them back up to their previous post-COVID peak, and eradicating the three rate cuts they made last year. Hedge Clippings checked in with our regular contributors, Nick Chaplin from Seed Funds Management, and Renny Ellis from Arculus Funds Management, to get their respective views on the wisdom - or otherwise - of the Bank's decision.

Both were broadly united in the view that the RBA's latest 0.25% rate rise to 4.35% may have been widely anticipated, but was poorly timed, and raised more questions than it answered.

Nick Chaplin argued the move effectively reverses last year's rate cuts, taking the cash rate back to where it was before the RBA began easing. His central concern was the distinction between temporary inflation pressures and persistent inflation. With the trimmed mean holding at 3.3%, he questioned whether the RBA was reacting too heavily to energy-driven price pressures and their knock-on effects through logistics and household costs. While he accepted the Bank is right to be focused on inflation, he was skeptical of its approach, particularly the continued reliance on incremental 0.25% increases. If the RBA believes inflation risks are still rising, Nick suggested it may need to be clearer about where rates are heading, with the possibility that the cash rate could move as high as 4.85% before year-end.

Renny Ellis was more direct, describing the energy shock as transitory and arguing the RBA should have looked through it, at least until the June meeting. His concern is not that inflation should be ignored, but that the Bank has acted before the full economic impact of the previous two rate increases has flowed through. Renny also warned that the decision was made ahead of a Federal Budget due next week that may include higher taxes, housing-related measures and household handouts, all of which could materially alter the economic outlook.

Both Nick and Renny highlighted the risk that policy is now being tightened into a fragile environment. Ellis was particularly concerned about the potential for diesel rationing, arguing that it would almost certainly push Australia into recession. He drew a sharp contrast with 2020, when both the RBA and the Federal Government acted aggressively to avoid recession, noting that Australia's high household debt levels make a downturn especially dangerous.

A key point from Renny was that the usual transmission mechanisms for monetary policy look less effective in the current environment. With the Australian dollar already strong, he questioned how higher rates would help beyond depressing house prices and household spending. Nick added that a stronger dollar could itself make it harder for the economy to avoid recession, particularly given Australia's past reliance on currency weakness and resource exports to cushion downturns.

Both agreed that further rate increases may still become necessary later in the year, particularly if wages growth, the Fair Work Commission decision, fiscal policy and household spending keep demand elevated. However, both also argued that this was not the right moment to move. Their central criticism was not that inflation is irrelevant, but that the RBA has acted in a period of unusually poor visibility, with energy markets, the Budget and household stress all still unfolding.

So as Renny questions in the video below, that leaves the potential that we are headed not for the "recession we had to have" but for the "recession we can't afford"? The outcome or length of a one-page, paper-thin, so-called truce in the Middle East could tip the balance.

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