Rudi’s View: Aussie Broadband, oOh!media, Paladin Energy, Seek, Xero & More

Rudi's View | 5:10 PM

We was wrong.

It's the kind of phrase protagonists say in American movies and that makes viewers like myself squirm, but then again, apparently 'dove' instead of 'dived' is also permitted in the land of Kaiser Donald J.

Macquarie's latest strategy update on Australian equities, released earlier today on Thursday morning wouldn't use American colloquialisms, of course, but the strategists might have just as well, because that is the key over-riding message expressed to their clientele.

Up until today, Macquarie strategists have been warning about too much exuberance in equities, advocating a cautious and defensive portfolio set-up while expecting this year's runaway stock market train to come unstuck.

But it hasn't happened.

Today's mea culpa suggests the focus has been too much on PE expansion and the RBA holding out on rate cuts. Outside of Australia, central banks have been cutting rates at a pace nearly never witnessed outside of economic recession, and it is translating into growth resilience and momentum picking up.

Add a just as rare technology boom and this year's cocktail suggests the world is trending towards a better place, not one-way into malaise and struggles.

Better times ahead means the Model Portfolio was too defensively positioned. Macquarie strategists have responded by adding more exposure to Technology and AI, and less to bond proxies (bond yields might not weaken as much as earlier thought).

The following stocks have been added to the Model Portfolio:

-NextDC ((NXT))
-Seek ((SEK))
-Paladin Energy ((PDN))

These additions compliment the likes of Xero ((XRO)), Megaport ((MP1)) and Goodman Group ((GMG)).

For more cyclical exposure, the Portfolio now also owns Lovisa Holdings ((LOV)) and Web Travel Group ((WEB)). Also added has been Challenger ((CGF)) on anticipation of a more limited fall in bond yields.

Exposures that have been reduced: Transurban ((TCL)), GPT Group ((G:PT)) and James Hardie ((JHX)).

On the strategists' own assessment, if their revised outlook proves correct, Australian companies should see earnings upgrades in FY26.

That will be the logical litmus test, both for Macquarie's about-face and for current elevated PE ratios.

Global equity strategists at UBS remain on the lookout for downgrades to current growth forecasts, and for decelerating economic indicators while the Federal Reserve will only be ready to deliver its next rate cut in September.

UBS thus suggests equity markets might find the going a little more challenging, with the extra comment that any pullback larger than -5% would come as a surprise.

Weakness should still be treated as an opportunity to buy more shares, in UBS's view (being relatively relaxed about potential impacts from tariffs).

Investors have rightly learned to buy the dip, say the strategists, with US corporate profits still expected to grow (albeit more slowly), the AI theme still booming and USD weakness supporting nearly 25% of S&P500 revenues that are generated internationally.