Portfolio Construction Forum Portfolio Construction Forum

The top 20 stocks comprise 63% of the ASX200, and the index is heavily skewed towards banks (20.9%) and iron ore miners (14.8%). Given the expected negative growth in the banking sector and the vulnerability of iron ore prices due to a weak demand outlook, Australian equity markets could well be anchored by the 'dinosaur seven'. With inflation at a two-year low but still well above the RBA’s target rate of 2% to 3% and rate cuts still uncertain, the outlook for Australian equity markets continues to look volatile. Investors seeking diversification, reduced volatility, and higher unique alpha over the long term should explore opportunities beyond the ASX20, focusing instead on the Ex-20 index. This index provides exposure to Australia's future rather than its past and is forecast to have 7.8% EPS growth pa over the next three years. - Dion Hershan, Yarra Capital Management. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

There's no such thing as "normal" for supply chains. The challenges for 2024 and 2025 that have echoes in the past include logistics network disruptions, geopolitical risks and the cash costs of environmental policies. That makes investing in supply chain security more important than ever. However, there's evidence that firms are scaling back spending on two of the three most important resilience-building measures. Companies' under-investment in supply chain resilience doom them to repeat past disruption failings. - Chris Rogers, S&P Global Market Intelligence. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

The bulls are back in charge of markets, as investors dream of a happy ending to the seismic dislocation following the global pandemic. Yet, for those willing to look beyond the headline economic data, a more uncertain outlook emerges. In the US, the disconnect between real GDI and real GDP rhymes with the period preceding the Global Financial Crisis. And, there’s the very real chance that history will in fact repeat and deliver a second Trump presidency later this year. Along with heightened global geopolitical risks, the Axis of Autocracy, reduced fiscal support from governments, a deflating Chinese property bubble, and an ongoing US commercial real estate crisis, 2024 is a year for investors to be nimble and tactical. There will be sensational trading opportunities for those able to navigate the risks hiding in plain sight. - Jonathan Pain, The Pain Report. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Second term presidents tend to be more ideologically aggressive, since they are freed from the need to face voters again. At a minimum, a Trump 2.0 administration would likely boost traditional energy, defence, and financial services, among other sectors which would benefit from lighter regulation. Meanwhile, Trump's "America First" trade policies could be inflationary and further increase US tensions with China, given Trump's promise to revoke China's Most Favored Nation trade status it has enjoyed since 2001. Investors globally need to think through the implications of a second term for either candidate. - Libby Cantrill, PIMCO. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

With Australia's residential vacancy rate at a record low and net overseas migration at a record high, it has never been more apparent that Australia needs a long-term housing solution to help expand supply. With rigorous capital provisioning models placed upon major banks following the GFC, the banks can no longer participate in the market like they used to, providing greater opportunity for real estate private credit lenders to fill the gap. This all combines to help generate attractive risk-adjusted returns for investors in the asset class. - Mark Power, Qualitas. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

There's much to learn from history, but every time is different when it comes to markets. Inflation in the 2020s has been very unlike that of the 1970s. The inevitable recession that did not occur was likely prevented by unprecedented fiscal stimulus. Going forward, short-term interest rates will likely fall, but long-term rates might rise. Equities are unlikely to revisit the frothy heights of 2021 and market breadth should widen. As cyclical inflation subsides, structural price pressures driven by reglobalisation and the energy transition will collide with the deflationary force of AI. The backdrop for investing will require investors to identify how the outlook today intersects with our experiences of the past and where it differs. This time is different because every time is different. - Ronald Temple, Lazard. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum