The S&P/ASX 200 Accumulation Index ended the week flat, lifted by gains in information technology (+2.7%) and real estate (+1.8%) but weighed down by energy (-4.5%) and industrials (-1.3%). The ASX Small Ordinaries Index outperformed, up 0.6%. Australia announced an additional $25 billion in defence spending, intended to demonstrate to the US its commitment to the AUKUS agreement. This is positive for defence-exposed companies, including Service Stream (ASX: SSM), which we discuss below.
In the past fortnight, banks announced major staff cuts: 4,500 at ANZ (ASX: ANZ), 410 at National Australia Bank (ASX: NAB), 200 at Bank of Queensland (ASX: BOQ) and 158 at Bendigo and Adelaide Bank (ASX: BEN). Macquarie Group (ASX: MQG) also said it will trial artificial intelligence (AI) ’employees’ for some office functions, overseen by a human supervisor.
In the US, the S&P 500 gained 1.6% and the MSCI World Index (AUD) rose 0.3%, while the Small Cap 600 fell 0.5%. Markets were buoyed by expectations that the Federal Reserve will cut rates this Tuesday, despite US inflation rising from 2.7% to 2.9% in the year to August. Core CPI, excluding food and energy, rose 3.1%. While inflation remains above the Fed’s 2% target, investors expect easing given recent signs of labour market weakness.
Markets were also supported by AI enthusiasm, with Oracle (NYSE: ORCL) announcing a substantial guidance increase after several large AI deals. We discuss this further below, including Goodman Group’s (ASX: GMG) AI exposure. Klarna (NYSE: KLAR) launched on the NYSE, with shares jumping as much as 43%, signalling the IPO window is open.
In Europe, the European Central Bank (ECB) left its deposit rate at 2% as expected. UK data showed zero economic growth in July after a 0.4% rise in June, and production output, including manufacturing, fell by almost 1%.
Looking ahead, we will be watching interest rate decisions from the US Fed, the Bank of Japan, the Bank of England and the Bank of Canada, along with US-China trade talks and the release of Australian trade data.
Stock Watch
Goodman Group (ASX: GMG)
Goodman Group is a global industrial property group that owns, develops and manages logistics, warehousing and data centre real estate. Its shares performed well last week after Oracle (NYSE: ORCL) reported accelerating demand for cloud infrastructure driven by AI workloads, boosting investor confidence in AI-related infrastructure. Goodman is well placed to benefit, having raised $4 billion earlier this year to fund data centre expansion, with 500 megawatts targeted to be in development by June 2026.
Held in: WAM Leaders (ASX: WLE), WAM Income Maximiser (ASX: WMX) and Wilson Asset Management Leaders Fund
Service Stream (ASX: SSM)
Service Stream, an essential infrastructure services provider operating across the telecommunications, utilities, transport and defence and social infrastructure sectors, secured two Base Services Contracts with the Department of Defence. The contracts are worth $1.6 billion over six years (with up to four years of extensions) and cover South Australia and the Northern Territory. Starting 1 February 2026 and earnings accretive from FY2027, the contracts provide a foothold into a new market for Service Stream where it can leverage existing expertise across water, energy and telecommunications. The long-term contracts also diversify group revenues, complementing organic growth rates in its utilities and transport businesses.
Held in: WAM Capital (ASX: WAM), WAM Microcap (ASX: WMI) and WAM Research (ASX: WAX)
Safran (EPA: SAF)
Safran is a global leader in commercial aircraft engines through its CFM joint venture with GE Aerospace, as well as a provider of other aerospace equipment and services. Our meeting with Safran in Paris last week reinforced our view that the company is successfully shifting from the CFM56 to the next-generation LEAP engine. The industry also has strong tailwinds, including significant unmet demand from airlines for narrowbody aircraft, which is leading to fewer retirements and higher utilisation of the CFM56-powered aircraft later into their useful life, supporting healthy aftermarket profits for Safran. We also view the rumoured sale of Safran’s cabins business positively, as it sharpens the focus on their portfolio of high-margin, aftermarket-driven products and services. Overall, we anticipate strong earnings growth over coming years as a catalyst to drive the stock.
Held in: WAM Global (ASX: WGB)
Deakin Childcare (Barwon Investment Partners)
Our investment partner Barwon Investment Partners is seeking to refurbish the building previously known as the Beaver Galleries into a 98-place childcare centre, on the western edge of the Calvary John James Hospital campus. Development Application approval has been secured for the new Deakin Childcare facility and construction is expected to commence in the second half of 2025. Barwon has already secured a 15-year lease for the asset with Insight Early Learning, providing long-term, stable cashflows alongside the potential for revaluations as improvements are made to the building.
Held in: WAM Alternative Assets (ASX: WMA)
FY2025 Full Year Results and Webinars
Over the past two weeks we have hosted the WAM Capital, WAM Microcap, WAM Research and WAM Active (ASX: WAA), WAM Leaders, WAM Alternative Assets, and WAM Strategic Value (ASX: WAR) Full Year Results webinars. In case you missed them or would like to revisit the recordings, you can do so below.
- WAM Capital, WAM Microcap, WAM Research and WAM Active
- WAM Leaders
- WAM Alternative Assets
- WAM Strategic Value
You can register to attend the WAM Global webinar on Tuesday, 23 September 2025.
Deep rate cuts being predicted, but recession risk is minimal
US money markets are pricing in almost six 25bps (0.25%) rate cuts from the Fed by the end of 2026. Yet the implied probability of recession suggested by bonds is very low. Historically, the yield curve – the spread between long-term bond yields and short-term rates – is a powerful predictor of recessions. However, it tends to over-predict their occurrence, forecasting ten out of the past eight recessions.
Of course, there is always debate about which yield curve is most relevant for predicting recessions. We do not think that there is any one measure that is superior to the rest. Indeed, we think that the most useful bond market gauge of future recession risk is the percentage of yield curves that are negatively sloped (inverted), allowing for yield curve slopes to be calculated between any two maturity points along the curve.
At present, the implied recession probability is 42%, based off of 55 possible yield curves, well below 60-70% levels that typically precede an official recession. To be sure, the current recession probability is down from 2022-23 levels that were consistent with a recession that has not yet materialised. Nevertheless, our point is that recession risk is currently low and inconsistent with the deep rate cuts being priced in by investors.
For equity investors, this means that we are not in a regime where we need to worry about market-wide earnings downgrades. However, if markets price out some rate cuts and bond yields rise from unusually low levels, it is worthwhile considering where to find valuation protection as rising bond yields typically puts pressure on share prices, especially those that look expensive.
Upcoming Wilson Asset Management events
WAM Alternative Assets (ASX: WMA) Meet The Manager
Thank you to those who have attended the Meet The Manager events over the past two weeks. We enjoyed meeting with fellow shareholders in Brisbane, Adelaide and Sydney to discuss the WAM Alternative Assets investment portfolio together with Portfolio Manager Nick Kelly, Investment Analyst Jacob Grover and Investment Specialist Martyn McCathie.
There is still time to secure your place for our final event in Melbourne on Wednesday. Click on the link below to register for the upcoming event:
- Melbourne | Wednesday, 17 September 2025
October Shareholder Presentations
The Wilson Asset Management and Future Generation teams look forward to meeting with shareholders at our upcoming Shareholder Presentations in October. Meet the Wilson Asset Management investment team to hear their market outlook, high-conviction stock picks and discuss some of the key themes influencing the investment portfolios. Learn more about the Future Generation companies and how they invest for impact, delivering both investment and social returns for shareholders.
Register using the following links:
- Newcastle | Thursday, 16 October 2025
- Gold Coast | Tuesday, 21 October 2025
- Toowoomba | Wednesday, 22 October 2025
- Noosa | Thursday, 23 October 2025
Index returns performance table
