Rudi’s View: The End Of RBA Rate Hikes Is Nigh

Rudi's View | 4:38 PM

The share market is preparing for the end of RBA tightening and Bell Potter has joined the trend. Plus updates on Conviction Calls.

In today's update:

• The RBA Is (Almost) Done; Start Positioning
• Ord Minnett's New Convictions
• Consumer Stocks: How Much Worse?
• Citi's Conviction

By Rudi Filapek-Vandyck, Editor

The RBA Is (Almost) Done; Start Positioning

This week, Bell Potter joined me and others who have been suggesting that the end of the RBA's policy tightening is likely near.

As should be clear from recent share price moves in, say, HomeCo Daily Needs REIT ((HDN)) and Abacus Group ((ABG)), Bell Potter is not the first to make this call, and its latest strategy update won't be the last either, with plenty of market participants not yet on board.

But the trend is emerging, and share prices are increasingly responding.

Even if there's still one final hike on the horizon, that doesn't change that the end is near. Markets are forward-looking.

Bell Potter's advice is therefore that investors should start positioning accordingly, favouring Australian listed property and fixed-rate bonds.

Importantly, the strategy does not require imminent rate cuts: a pause, stabilising bond yields and slowing economic growth could be sufficient to support returns.

This week's strategy update identifies three potential sources of returns from listed property:

• Narrowing valuation discounts: stabilising yields should ease pressure on property valuations, while eventual rate cuts would improve financing conditions.
• Distributions: larger REITs, excluding Goodman Group ((GMG)), offer an average yield of around 5%, providing income while investors await a recovery.
• Rental growth: expensive construction and financing are restricting new supply, supporting rents for existing, well-located properties.

The report suggests income combined with a modest valuation recovery could produce double-digit returns over the next twelve months.