Rudi's View | 4:37 PM
Update on expert views, favourite stocks and Top Picks post the August results season in Australia.
By Rudi Filapek-Vandyck, Editor
The key conclusion at my presentation to members of the Australian Shareholders' Association (ASA) in Canberra on Monday was that megatrend AI is already changing the world as we know it.
At this early stage of development, this is generally a positive.
Clearly, global macro strategists at Citi agree with that statement. Ahead of this week's FOMC -25bp rate cut, their conclusion was that Fed policy easing in combination with a booming AI capex cycle translates into a soft landing for the US and the global economy.
Irrespective of all the fears, threats and worries out there, such an outcome is a positive for equities, assuming more cuts will follow and nothing untoward disrupts the AI megatrend.
I think counter-scenarios are definitely possible, but not very plausible at this point.
Market strategists at Macquarie spelled it out in more detail on Thursday morning: the Federal Reserve is adding more liquidity in a market where growth is OK.
Taking a leaf from history, Macquarie is anticipating stocks will outperform bonds, cyclicals (including technology) will outperform defensives, and Growth (including technology) will beat Value.
Ahead of this week's rate cut (delivered as expected), Macquarie's Model Portfolio added more exposure to technology through NextDC ((NXT)) and Seek ((SEK)) and to Growth via Lovisa Holdings ((LOV)) and Webjet Travel ((WEB)).
Reduced exposures include defensives, bond proxies and US housing. The latter decision is inspired by perceived risk of higher yields.
Macquarie research signals cyclicals that should benefit from renewed Fed rate cuts and stronger US growth (even with a weaker USD) include Block ((XYZ)), Aristocrat Leisure ((ALL)), Light & Wonder ((LNW)), Breville Group ((BRG)), Car Group ((CAR)), Flight Centre ((FLT)), and Credit Corp ((CCP)).
Other beneficiaries should be gold companies and smaller caps.
Now that we've mentioned small caps... Wilsons analysts highlighted this week earnings growth expectations are highest in Australia for profitable small cap companies (note the addition of 'profitable').
Wilsons' two favourites are Ridley Corp ((RIC)) and Nanosonics ((NAN)).
Other 'noteworthy' opportunities, according to Wilsons research, include Maas Group ((MGH)), GemLife Communities ((GLF)), Autosports Group ((ASG)), Jumbo Interactive ((JIN)), ARB Corp ((ARB)), and Tyro Payments ((TYR)).
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