Rudi’s View: Many February Uncertainties

Rudi's View | 10:00 AM

2026's February results season offers more for investors to consider than simply earnings and outlook statements.

By Rudi Filapek-Vandyck, Editor

By Rudi Filapek-Vandyck, Editor

It is my favourite observation prior to each corporate results season in Australia: every season tends to have its own specific context, which also defines differences in share price responses and ultimate outcomes.

Ahead of February results (mostly in the second half of this month) general positioning and sentiment are in alignment with the major shifts that flavoured the local market in 2025.

In simple terms: stocks that before mid-year last year could do no wrong have fallen out of favour and those seen languishing for most of the three years prior have sprung to life in a manner seldom witnessed unless after a big economic recession or amidst a major reset in bond yields.

In plain layman's lingo: Quality, Growth, Technology and AI beneficiaries and infrastructure are now suffering a prolonged bear market while a new bull market has opened up for cyclicals, miners, mining contractors, and the likes.

This is your Growth versus Value switch professional fund managers like to talk about in full display.

The Return Of Corporate Earnings Growth

Carried by strong rallies in industrial metals and minerals, parabolic moves in precious metals and a resurgence in oil prices, earnings forecasts in Australia are now in a firm uptrend and, as analysts are usually slow to catch up to such strong pricing momentum, this trend looks far from finished just yet.

After three years of net negative earnings erosion for corporate Australia, aggregate consensus EPS growth projections are now signalling 11.3% growth is on the menu for FY26, to be followed up by 8.6% growth in FY27.

It wasn't that long ago market strategists at UBS reported the long-term average pace of growth in Australian earnings lays around 4.5%-5% per annum, so these numbers suggest a new boom time has arrived.

Certainly, when the team here at FNArena is updating earnings estimates these days it is not uncommon to see future numbers increase by 50%, 70%, or even 100% for smaller cap mining companies, which easily explains investor enthusiasm and strong share price gains over the past six months or so.

Narratives supporting the world's newfound focus on 'hard assets' includes geographic disruption and risks (including US tariffs), the prospect of prolonged US dollar weakening (see also: erosion of its status as the global reserve currency), higher bond yields (lots happening), persistent inflation (also: angst about it rising), renewed stimulus and 'money printing' in China and the US, ongoing strong demand through data centres, renewables and AI infrastructure, and looming under-supply in the face of rising demand.

Not unimportant for Australian-based investors: commodities tend to offer a natural hedge against an appreciating Aussie dollar unlike most exporters and international success stories whose financial numbers --one way or another-- feel the impact from a negative translation back into the local currency.

In January, things suddenly shifted in a parabolic manner, not only in prices of gold and silver, but equally so for AUD. Might this be yet another signal today's markets are increasingly led by narratives and continuation of momentum?

Time will tell, but the current set-up does not bode particularly well for those prior momentum leaders now in a nasty and enduring bear market; at least for now.