Global equity markets recovered strongly over the June quarter, with the MSCI Index up 12.5% in Australian dollar terms and 14.8% for the year, as investors looked beyond geopolitical tensions and refocused on the earnings performance of major companies. Attention centred on AI infrastructure and the semiconductor ecosystem, where earnings growth has been extremely strong, but valuations have, in our view, become excessive. Having been early investors in this area, we sold our holdings over the last year and, after five years of very high global equity returns, believe increased discipline in weighing risk against return is required. Opportunities remain in the many sectors markets have ignored, and identifying value in these areas has been our focus.

The Australian market lagged its global peers, with the All Ordinaries Accumulation Index rising 4.0% for the quarter and 5.7% for the financial year, weighed down by software and services stocks viewed as likely victims of AI, while major resource companies were the brightest spot. Domestically, inflation is proving more persistent than widely expected, prompting the RBA to lift the cash rate to 4.35% in May before pausing in June — moving earlier than central banks in other developed economies, where the Federal Reserve and Bank of England held rates steady and the ECB delivered a modest tightening. This relative weakness has created opportunities, particularly across services industries where share prices now appear to reflect an overly pessimistic view of the earnings outlook.

Listed property rebounded strongly, supported by improving financing conditions and the return of institutional capital, which drove a pickup in commercial real estate transaction activity. Industrial and retail assets benefited from resilient occupancy and steady rental income growth, while a continued flight to quality supported premium office. Across portfolios, our emphasis remains on quality businesses at reasonable valuations, with recent activity directed toward sectors where the market’s pessimism has left durable franchises attractively priced.

Please contact our team for further information of PPMs service offering at ppm@ppmfunds.com or 02 8256 3777.

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