Rudi's View | 10:00 AM
Earnings forecasts have not yet bottomed in Australia. The RBA may not yet be done. Then there's the war, the price of oil and the midterms in the US. Plus a mini results season locally.
By Rudi Filapek-Vandyck, Editor
From my observations, the Australian share market is trying to revive itself now that the August results season is over and the end of the calendar year is beckoning.
Many lagging share prices have cautiously sprung to life in recent weeks, recovering from beaten-down levels.
As highlighted previously, the percentage of Buy-equivalent ratings from the seven brokerages monitored daily here at FNArena has again surged above 65%, which is near an all-time high.
This helps, for sure, and I have little doubt there's significant value on offer for bargain hunters with a three-year investment horizon in mind.
But in the shorter term, this market continues to face multiple headwinds that may just scupper this emerging optimism.
Broker ratings turning positive are not enough on their own to get this market going, I don't think.
What would help is a sustained reversal in earnings forecasts, but that still looks like wishful thinking at this point in time.
Aussie Consumers Not Feeling The Love
For good measure: estimated earnings are by no means falling off a cliff in Australia, but they are still trending south as higher diesel prices, skilled staff shortages and unseasonal weather weigh on mining companies' quarterly performances.
Most of all, though, analysts have been forced to --yet again-- further reduce expectations for consumer-related businesses.
Recent market updates have not been universally negative, with Reece ((REH)), Temple & Webster ((TPW)) and Endeavour Group ((EDV)) among this season's positive surprises so far.
But ask shareholders in Coles Group ((COL)), JB Hi-Fi ((JBH)), Myer ((MYR)), Nick Scali ((NCK)), Super Retail ((SUL)) or Wesfarmers ((WES)), and they have all had a much less buoyant experience of late.
The offset to underwhelming trading updates has been the willingness of buyers to step in on share price weakness, at least as far as Coles, JB Hi-Fi, Super Retail and Wesfarmers are concerned.
More evidence that some investors are willing to put their money into better-quality businesses whose shares look "cheap" on a multi-year horizon?
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