Rudi’s View: The Risk Of Disappointment

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            [5] => ((TLS))
            [6] => ((WOW))
            [7] => ((TNE))
            [8] => ((WTC))
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This story features WORLEY LIMITED, and other companies.
For more info SHARE ANALYSIS: WOR
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

Profit warnings are arriving for Australian investors. This type of risk is unlikely to subside when the war ends (hopefully soon).

By Rudi Filapek-Vandyck, Editor

There’s a lot to take into account for investors apart from what might be happening in the immediate between negotiating parties in the Middle East.

On Monday, engineering group Worley ((WOR)) and logistics services provider Qube Holdings ((QUB)) both warned about negative ramifications from the war and closure of the Strait of Hormuz.

Elsewhere, the March 2026 CreditorWatch Business Risk Index revealed elevated fuel and energy prices are feeding directly into business stress, compounding the impact of higher interest rates and subdued demand, and lifting the risk of insolvencies over the year ahead.

Investors already knew from market updates by Westpac ((WBC)) and National Australia Bank ((NAB)) the local banking sector is taking precautionary steps ahead of what might well turn out a prolonged fall-out from this year’s war-induced energy crisis.

Meanwhile, Capital Brief reports the latest developments in AI, including Anthropic’s Claude Mythos, have rattled decision makers at local banks and superannuation funds, as well as regulators APRA and ASIC.

The concern is no longer about job losses or whether more spending is required to keep up with the ever-changing technological landscape; Australia’s corporate backbone is now worried about being left behind and leaving the country in an “unfathomable competitive disadvantage”.

Apparently, the local superannuation industry cannot yet combine forces in an attempt to establish a coordinated response to cyber threats until August, when the ACCC is expected to rule whether such collaboration will be allowed.

Even before war broke out in late February, the signs were there that corporate Australia would have to deal with rising pressure from higher costs in combination with decelerating demand. Those two opposing factors have only become more acute since the war broke out.

A period of stagflation still seems but a plausible, if not likely outcome and we’d all be hoping it will be a mild version, not a repeat of the 1970s. The local bond market is nevertheless signalling two more RBA rate hikes should be forthcoming. Most economists seem to suggest May and June are most likely.

All of this suggests the Australian economy will be battling hurdles and headwinds. Strategists at Morgan Stanley rightfully point out the general context today looks a lot different from back in 2022 and 2023 and businesses will find it more challenging to pass on higher costs to customers.

Central banks don’t want it. The government doesn’t want it. I think it’s only fair to conclude Australian households will equally resist as well as they can (they cannot on rent and on essentials, of course).

Then there’s the more structural fall-out from the cost-of-living crisis plus extra spike in energy prices; consumers leaning into solar, batteries and electric vehicles, while governments the world around are reviewing their energy vulnerabilities in the broadest sense possible.

ESG policies most definitely are not of the highest concern for the decade(s) ahead.

Put it all together and one would have to agree with the caution as expressed by strategists at Morgan Stanley, UBS, and elsewhere: corporate market updates now come with a higher degree of risk for disappointment, see Worley and Qube on Monday.

Worley shares had been given the cold shoulder by investors, but its shares still dived by -7% on the warning.

Qube Holdings will soon be acquired by a Macquarie Asset Management-led consortium, and the latest market update is not going to change that.

Hence why Qube shares did not follow the same script as did the Worley share price.

Market bottoms are different now

A recent analysis of share market sell downs –outside of prolonged bear market periods– by Longview Economics does offer some upbeat news for equity investors.

The typical historical pattern used to be that sharp sell-offs would see a relief rally and then a retest of the prior low from that initial sell-off.

We can but guess as to why, but this pattern has changed in recent years: there’s no longer a retest of the preceding low after the relief rally. This strongly suggests most share prices have seen their low for the foreseeable future, which is also the conclusion that supports an overall positive view for equities at Longview.

Examples of sharp sell-offs that were not followed up by a retest of the preceding bottom include last year’s response to the Trump tariffs in April, as well as the initial response to the covid virus outbreak in 2020, and in between the US banking scare of February-March 2023 and concerns about the yen carry trade in mid-2024.

The obvious comment to make here is that if a worse case scenario were to unfold, which essentially pulls the global economy into a not so mild stagflation, and thus equities into an old fashioned broad-based bear market, none of Longview’s analysis would hold up.

But thus far, no credible voice is seriously contemplating such an outcome. Certainly markets are not (quite the opposite).

It nevertheless needs to be pointed out, the ramifications from the Iran war will be a lot larger for Australia than it will be for Canada or the US, and that is already reflected in the local share market underperforming.

Portfolio Adjustments

“Rudi, how you are playing the current market? What stocks are you buying or topping up?”

The question occasionally lands in my inbox and this week is no exception.

In a broad sense, I think my personal challenges are the same as for every other investor in this market; there remains an uncomfortable degree of potential downside and uncertainty, but all in all I tend to agree with the broad market’s assessment that the risk for more negative outcomes has shrunk, albeit that’s still only an assessment, not an actual outcome.

While many stocks are by now trading well below prices from last year and in many cases at multiple percentages below analysts’ price targets, investors need to remain cognisant that valuations and targets can change quite dramatically in case of a profit warning or general risk-off sentiment.

The latter is what has happened to the local technology sector over the past ten months and what will inevitably happen if a global recession (or stagflation) would announce itself.

Equally important: seeking safety in ‘cheaply’ priced stocks sounds fantastic, and logical, until one realises there remains real and tangible risk for profit warnings, and that is not necessarily incorporated in today’s share prices.

Worley shares, for example, didn’t look particularly ‘expensive’ or bloated before Monday’s market update, but they incurred further damage nevertheless. Most price targets are well, well, well above the share price and that, I suspect, will remain the case even after forecasts and targets will reset in the days forthcoming.

I guess your typical ‘value’ investor might counter-argue: at least Worley shares didn’t fall as much as a2 Milk ((A2M)) shares which, pre-profit warning, were trading on much higher multiples. And yes, no argument there.

But I’d rather avoid profit warnings as much as I possibly can, and this means I reflect on what exposures are inside the FNArena/Vested Equities All-Weather Model Portfolio, and whether they should be reduced out of simple and straightforward risk management.

In terms of new additions, my focus has been on not overextending towards one particular factor or theme, plus I remain cognisant of the fact that smaller sized companies –all else remaining equal– in this type of environment most likely represent higher risk.

I don’t think your typical defensive exposure, unless the share price has been impacted by higher bond yields, is looking attractive currently. The likes of Telstra ((TLS)) and Woolworths Group ((WOW)) have performed strongly. They are both in the Portfolio, but I would not add to these exposures from here onwards.

I do draw confidence from how well shares in TechnologyOne ((TNE)) have performed since management communicated how well the business was performing, and upgraded guidance. Amidst ongoing widespread doubt and scepsis among investors, most technology shares have rallied strongly in recent times.

Part of me likes to blurt out: Just as well! About bloody time!

In all seriousness, I think the message is clear to both business leaders and investors: the market wants a tangible sign that businesses are performing well.

TechnologyOne management understood this, and responded accordingly, and loyal shareholders (myself included) have seen the reward.

My inclination is to stick with the larger cap, higher quality names on the ASX. Whether this also includes WiseTech Global ((WTC)), where founder/CEO Richard White represents key one man risk, is a personal choice.

Sector analysts at Morgan Stanley and Ord Minnett have released their updates and preferences and those can serve as a guide for investors looking to get on board (or deciding what to hang on to) — see also the link below.

My personally curated lists remain accessible 24/7 for paying subscribers: https://fnarena.com/index.php/analysis-data/all-weather-stocks/

On my assessment, this is an environment that suits diversification, hence new additions are very much dependent on what already is in the portfolio.

Above all, there remains plenty of risk for the months ahead, regardless of what happens to the war or to share prices, and that means caution is good (not a sin) and haste best avoided.

****

See also: 

https://fnarena.com/index.php/2026/04/09/rudis-view-trumps-circus-technologys-brave-new-world/

https://fnarena.com/index.php/2026/04/02/rudis-view-strategists-touting-opportunities/

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(This story was written on Monday, 20th April 2026. It was published on the day in the form of an email to paying subscribers, and again on Wednesday as a story on the website).

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views are mine and not by association FNArena’s see disclaimer on the website.

In addition, since FNArena runs a Model Portfolio based upon my research on All-Weather Performers it is more than likely that stocks mentioned are included in this Model Portfolio. For all questions about this: contact us via the direct messaging system on the website).

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