Rudi's View | Jul 29 2026
This story features COCHLEAR LIMITED, and other companies.
For more info SHARE ANALYSIS: COH
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS
With August results approaching, investors better prepare for a spike in share price volatility.
By Rudi Filapek-Vandyck, Editor
The list of potential risks for Australian investors received an extra item to worry about on Monday morning, as Morgan Stanley warned the interplay between global and domestically sourced macro risks is increasing the chances of stagflation, i.e. persistently high inflation combined with tepid economic growth.
It’s not as if that list didn’t already contain plenty of potential mishaps, from geopolitics (the Middle East and Ukraine) to renewed inflation pressures and a hawkish RBA, falling property prices and a fragile-looking consumer, widely disliked changes to capital gains taxation, and a heavily polarised, though lacklustre, share market.
Put it all together and is it any wonder the ASX200 has hardly managed to make any progress since the start of 2026?
On Friday, total gains excluding dividends after nearly seven months stood at a very underwhelming 0.67%.
As reported last week, both the average and median year-to-date returns for the 200 stocks involved are negative, at -4.21% and -4.54%, respectively.
Against this background, investors are bracing for what could potentially become another brutal reporting season in August.
The Best Year Since FY22
At face value, market forecasts are for aggregate earnings-per-share growth for the ASX200 of circa 12% in FY26; the fastest pace since FY21 and FY22, when the world was transitioning out of societal lockdowns.
Australia has since suffered three consecutive years of net negative growth, so FY26 marks an important turning point. But that’s assuming the 12% survives throughout August, and there’s plenty of doubt about that.
Strategists at Morgan Stanley, for example, predict that number might well halve once all earnings releases have been accounted for.
Peers at UBS explain the 12% growth rate instantly falls to 4.5% once forecasts for resources companies are removed, and to only 2.5% if the banks are also excluded.
The message for investors seems loud and clear: expect disappointments and downgrades.
The extreme share-price volatility that has characterised local results seasons over the past three years looks poised for a repeat next month.
So far, expectations are for 11.8% growth in FY27, but the underlying local dynamics are expected to shift throughout the year ahead.
If current forecasts prove accurate, the Australian economy should embark on a new uptrend in 2027, with the RBA expected to deliver rate cuts.
This should improve the outlook for sectors currently under pressure.
Those sectors include healthcare, technology, property and consumer-related companies. August might be too early for better times to arrive, but investors will be paying close attention to corporate guidance for the period ahead.
One complicating factor is that fewer analysts at stockbrokers are translating into fewer research updates. Morgan Stanley observed last week that circa 27% of stocks have not seen a forecast update for 80 days or longer.
This yet again increases the risk of materially different outcomes when companies release their financials, creating another potential source of outsized volatility.
In the words of Ord Minnett analyst Athena Kospetas: “Markets should brace for outsized share-price reactions as expectations are recalibrated.
“The effect will be magnified by quant-driven trading, which has made outsized share-price reactions a permanent feature of reporting season.”
An Earnings Downtrend
UBS strategists note profit forecasts are currently in a downtrend across all 11 major ASX sectors, including resources.
Commodity prices are no longer trending upwards, as global growth concerns have resurfaced amid renewed hostilities in the Middle East and with no traffic still passing through the Strait of Hormuz.
In addition, persistently high inflation has translated into plenty of disappointments due to higher costs and expenses across the sector.
A stronger Aussie dollar, up 7% over the first half and 11% from the same time last year, is providing a partial offset for some businesses, but remains a clear negative when translating offshore sales into local earnings and dividends.
ASX sectors for which FY26 forecasts are currently the lowest include consumer staples, healthcare, real estate, IT services and, believe it or not, energy.
A stagnant Australian share market no longer looks “expensive” when compared with US indices. A PE ratio of circa 17x still looks elevated compared with the long-term average of 14.9x, but the average over the past decade has risen above 16x.
UBS makes a similar observation, calling current valuations reasonably in line with those of the past five years and applying a lot less hyperbole than your average armchair critic.
Ultimately, whether today’s share prices are ‘fair’, ‘cheap’ or ‘overvalued’ will, to a large extent, be determined by what’s inside corporate updates in August, including forward-looking statements.
Portfolio Preferences
In terms of portfolio positioning, UBS strategists prefer overweight allocations to healthcare, industrials and mining. Their least preferred sectors are banks, consumer discretionary and real estate.
Clearly, UBS is not yet convinced the RBA is done tightening the screws on Australian housing and consumer budgets in order to guide inflation back below 3%.
One factor supporting its preference for healthcare is the in-house view that the Aussie dollar will weaken throughout the year ahead.
In addition, PE ratios for many companies in the healthcare sector, including Cochlear ((COH)), CSL ((CSL)) and ResMed ((RMD)), haven’t been this low for a decade or longer.
The counter-argument to UBS’s portfolio preference is that some analysts are still anticipating more negatives than positives from the sector during the upcoming reporting season.
We reported earlier on RBC Capital’s negative stance:
https://fnarena.com/index.php/2026/07/17/treasure-chest-beware-aussie-healthcare/
Ord Minnett equally remains downbeat on property and consumer-linked companies. Businesses with US earnings are expected to outperform. The arrival of AI will continue to separate potential winners from losers.
Miners and energy producers are considered the one bright spot for the Australian share market, including refiners Ampol ((ALD)) and Viva Energy ((VEA)). Ampol is Ord Minnett’s preference.
Dividends Ready To Surprise
Recent research updates suggest investors can yet again look forward to various positive dividend surprises, including from the largest index weight, BHP Group ((BHP)).
Others mentioned as candidates for positive dividend surprises include BlueScope Steel ((BSL)), Mitchell Services ((MSV)), nib Holdings ((NHF)) and Sandfire Resources ((SFR)).
Dividends might be poised for a comeback at Westgold Resources ((WGX)), while Suncorp ((SUN)) could add to its share buyback.
On the other hand, Beach Energy ((BPT)) has been singled out as a candidate for a negative surprise.
It won’t be long now until we see a daily stream of financial result releases, but the same can be said of the next RBA meeting.
Meanwhile, the Strait of Hormuz remains closed and the ongoing debate about AI –in all its fervour and colours– continues to polarise the investment world.
That sums it up quite nicely. The August season in 2026 will be affected by a whole lot more than simply corporate results and outlook statements.
Newmont Corp ((NEM)) reported on Friday and James Hardie ((JHX)) pre-reported positive numbers, but the local reporting season effectively starts warming up next week, even though we’ll see Rio Tinto ((RIO)) report on Wednesday and Capstone Copper ((CSC)) on Friday.
The FNArena Corporate Results Monitor will be ready by the end of the week. Its calendar (scroll down) is getting busier by the day.
https://fnarena.com/index.php/reporting_season/
More reading:
https://fnarena.com/index.php/2026/07/23/rudis-view-pre-august-picks-in-resources-retail-small-caps/
https://fnarena.com/index.php/2026/07/16/rudis-view-small-cap-favourites-ai-more/
https://fnarena.com/index.php/2026/07/09/rudis-view-julys-stock-pickers-favourites/
https://fnarena.com/index.php/2026/07/02/rudis-view-best-buys-conviction-calls-in-july/
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