The recent pullback in major banks is reshaping domestic market dynamics, even as global sectors like energy and healthcare show resilience. Against this backdrop, our investment team remains focused on opportunities driven by structural growth trends and selective exposure to companies that are showing strong earnings momentum, especially as the U.S. earnings season unfolds and the domestic reporting season approaches.
Market Updates
The S&P/ASX 200 Accumulation Index declined by 1.0% for the week, driven by weakness in the financials sector (-3.9%), including Commonwealth Bank of Australia (ASX: CBA), which fell by 5.3%. This was partially offset by strength in energy (+3.9%), healthcare (+2.1%), and materials (+2.0%). The S&P/ASX Small Ordinaries Accumulation Index ended 0.1% higher. Reserve Bank of Australia Governor Michele Bullock cautioned that the RBA’s preferred measure of underlying inflation may not be falling as quickly as anticipated, signalling that an interest rate cut in August is not guaranteed.
In the U.S., the S&P 500 gained 1.5%, reaching record highs for the second consecutive week. This was supported by trade agreements with Japan, Indonesia and the Philippines, as well as a new agreement with the EU over the weekend, whereby goods exported to the U.S. will be subject to a 15% tariff, lower than the proposed 30%. The S&P Small Cap 600 Index rose 0.9% and the MSCI World Index (AUD) rose 0.8%.
Last week also saw a wave of corporate earnings reports in the U.S., including two of the Magnificent Seven stocks: Alphabet (NASDAQ: GOOG) beat expectations and Tesla (NASDAQ: TSLA) fell short of forecasts. The U.S. economy continues to show resilience, with business activity growth accelerating in July, according to S&P Global’s flash Purchasing Managers’ Index data.
The European Central Bank held its deposit facility rate steady at 2%, with accompanying commentary viewed as slightly hawkish, indicating a preference for higher interest rates to control inflation. Meanwhile, the UK and India signed the UK’s largest post-Brexit trade deal, eliminating tariffs on 99% of Indian products and 92% of British products.
Key watchpoints for this week include progress in U.S. trade negotiations ahead of the 1 August deadline, the peak of the U.S. corporate earnings season, and monetary policy decisions from the U.S. Federal Reserve, Bank of Japan and Bank of Canada
Stock Watch
Fisher & Paykel Healthcare (ASX: FPH)
Fisher & Paykel Healthcare is a global medical device company that designs and manufactures products to improve patient outcomes and hospital efficiency. We attended FPH’s investor day in Melbourne last Wednesday, which focused on the clinical application of its respiratory, neonatal and anaesthesia product suite across emergency, ICU and surgical settings. Australia and New Zealand were noted as early adopters of these technologies, with broader global uptake expected over time. The company is well positioned for strong top-line growth through new product rollouts and expanding clinical use, with the next catalyst being the Annual General Meeting on 21 August, where it is expected to provide a financial update.
Held in: WAM Leaders (ASX: WLE) and Wilson Asset Management Leaders Fund
Plenti Group (ASX: PLT)
Plenti Group, a fintech lender focused on automotive, renewable energy and personal loans, delivered a strong first-quarter FY2026 result. The company reported its third consecutive quarter of record loan originations, reaching $437 million, up 44% year-on-year. Its loan portfolio grew to $2.68 billion, a 21% increase from the same time last year, with solid growth across all lending segments. With a strong earnings profile and growth outlook, Plenti is well positioned for a potential upward re-rating of its valuation.
Held in: WAM Microcap (ASX: WMI)
Alphabet (NASDAQ: GOOG)
Alphabet, Google’s parent company, reported robust quarterly results, with growth across all business segments, exceeding consensus expectations. The company continues to solidify its position as a leader in artificial intelligence (AI), driven by strong demand for its comprehensive AI product suite. This momentum is reflected in Alphabet’s decision to increase capital expenditure to $85 billion, primarily to support infrastructure expansion. We remain confident that Alphabet’s strategic investments in AI will be monetised over time, boosting future revenues and reinforcing its long-term growth trajectory.
Held in: WAM Global (ASX: WGB)
TEN Group (Fortitude Investment Partners)
TEN Group (TEN) is Australia’s leading distributor of tools, equipment, material and machinery for the energy sector, supplying products and engineering expertise to utilities, contractors and infrastructure providers. Since the acquisition of TEN in May 2023, our investment partner Fortitude Investment Partners have expanded TEN’s product offering, successfully integrated a key supplier acquisition and strengthened the company’s sales and marketing capabilities. As a result, TEN’s earnings have significantly improved over the last two years, and the business continues to be highly cash generative. We see further upside in TEN through international expansion, domestic market share growth and additional opportunities for strategic acquisitions.
Held in: WAM Alternative Assets (ASX: WMA)
The global economy is performing better than sentiment indicators would suggest
In Q2, global industrial production (IP) grew at an annualised pace of 3.3%, a notable improvement compared with the outright contraction suggested by leading indicators such as the Institute of Supply Management (ISM) new orders index. Despite this strength, many central bankers globally have expressed concerns about downside risks to activity growth and the urgency of cutting rates. Historically, the U.S. Federal Reserve has reduced rates when the ISM new orders index is this far below the neutral level of 50.
The risk is now that the global economy continues to outperform expectations, while policy makers maintain dovish rhetoric (meaning they favour lower interest rates to support economic growth, even if inflation is slightly above target). In the short term, this is positive for earnings and supportive of elevated valuations. However, if commodity prices and global inflation begin to rise again, it could undermine the credibility of dovish central bank commentary and potentially shift market expectations.
Index returns performance table
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*All Australian S&P indexes in this table are accumulation indexes, meaning they account for both price changes and the reinvestment of dividends, providing a measure of total return.
#MSCI World (MSCI Daily Total Return Net World) and MSCI World SMID (MSCI WORLD SMID CAP Net Return) are both in AUD and are total return indexes i.e. include share prices and dividends. S&P 500 Index and Russell 2000 Index are similarly total return indexes.
^Corporate bond yields represent the return investors receive for holding debt securities issued by companies. These yields vary based on factors such as the issuer’s credit rating, economic conditions, and market interest rates, serving as a key benchmark for corporate borrowing costs.
**Australian long-term government bond yields represent the interest rates on government debt securities with extended maturities, typically 10 years or more. These yields reflect investor expectations for inflation, economic growth, and monetary policy, serving as a key benchmark for long-term borrowing costs in the economy.
##Australian housing prices are taken from CoreLogic Australia’s Cotality Home Value Index and Bloomberg.
^^The RBA cash rate refers to the interest rate set by the Reserve Bank of Australia (RBA) for overnight loans between banks. It serves as a benchmark for borrowing costs across the economy, influencing interest rates on mortgages, savings accounts, and business loans.
