Rudi's View | 10:00 AM
Today's share market might be most at risk from earnings disappointments, not so much of over-valuation.
By Rudi Filapek-Vandyck, Editor
The current Grand Debate among international investors is: what might happen when the war in Iran and Lebanon is over and the Strait of Hormuz is re-opened?
Will it mark the end of US equities' relative supremacy and allow the rest of the world to regain momentum?
Whatever your answer, there is as yet no imminent solution forthcoming, or so it seems, and even if the momentum pendulum were to swing back in favour of selected markets in Asia and Europe, I'm not convinced Australia will necessarily participate.
The relative difference in fundamental dynamics is once again expressed through corporate profits. The current quarterly result season in the US, albeit far from finished, is yet again outperforming against broad market forecasts and analysts' projections for the periods ahead are rising.
In Australia, momentum is most definitely turning.
The consensus EPS growth forecast is still sitting on a very robust 12% for the twelve months ahead, but it's all about utilities and energy producers benefiting from a big spike in the prices of oil and gas; elsewhere the trend is worsening.
And as analysts have only just started to re-align their modeling with the headwinds that are building, investors should expect more downgrades in the lead-up to the August results season.
Before then, we'll see official updates on the out-of-cycle numbers by the banks, including Macquarie Group ((MQG)), the agricultural sector, such as GrainCorp ((GNC)), Nufarm ((NUF)) and Orica ((ORI)), local technology, including Block ((XYZ)), TechOne ((TNE)) and Xero ((XRO)), as well as a varied collection of household names, including Amcor ((AMC)), Aristocrat Leisure ((ALL)), James Hardie ((JHX)), News Corp ((NWS)) and ResMed ((RMD)).
A Negative Turn
Given the current trend, and the obvious headwinds building from a stronger AUD, the energy crisis and further RBA rate hikes, it's probably best not to expect a similar positive stimulus from these market updates.
If anything, recent updates from the likes of Cochlear ((COH)), EVT Ltd ((EVT)), Generation Development ((GDG)), Hub24 ((HUB)), and IGO Ltd ((IGO)), among others, suggests the bias is to the downside.
Such is also the picture painted by the FNArena Corporate Results Monitor to date with result releases post February more likely to disappoint than beat expectations: https://fnarena.com/index.php/reporting_season/
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