Geopolitical Conflicts, plus a Reporting Season Wrap

The following is a transcript of an interview with Will Riggall, CIO – Bell Financial Group. You can watch the original interview here.

Sophia Mavridis: Thank you for joining us this Friday, the 6th of March. I’m Sophia Mavridis and I’m joined today by Bell Financial Group’s Chief Investment Officer, Will Riggall. Will, thanks for joining us again this Friday.

Will Riggall: No, it’s great to be back again, Sophia. It’s a little boring in these markets, so we’ll try and skip through it quickly and get to the key items on the agenda this week.

Sophia Mavridis: Well, jumping straight into it, reporting season has rounded up. What are some key takeaways from the month of February and any call-outs that investors should be thinking about?

Will Riggall: Yeah, look, with all that’s going on in the world, you can be forgiven for quickly forgetting how positive that reporting season was – up 4% over the month. Australia’s big stocks really showed the way. What was really interesting is that we did have those continual shifts underneath, but looking back at a broad level, the outcomes were that the EPS (Earnings Per Share) growth for FY26 has been upgraded.

We’re looking for 10% to 11% EPS growth this year; that’s really strengthened over the last six months. But what’s also positive is that those upgrades, or the expectations of growth coming from our companies, flow through to FY27 as well. Quite often you see these short-term boosts where people are confident about the year ahead, but because growth is a number on a number, FY27 usually wouldn’t be upgraded at this period. Instead, we’re getting 10–11% this year and 6–7% next year, which is above the long-term average. The Aussie share market is in pretty good shape and those companies are performing.

Sophia Mavridis: Well, moving from stock-specific movements to geopolitical tension – a big shift there. We are seeing broad-based market volatility as a result of the escalation in the Middle East. What are your insights there, and what do historical market records tell us about how markets will be impacted longer term?

Will Riggall: Yeah, thanks Sophia. It’s really important to look back and learn through history because, in these times of disruption, you can easily be forgiven for having a greater fear of the unknown. Outside of the human tragedy, what we have here is the US and Israel moving towards removing the leadership in Iran.

This is very different from what we had a year ago. The 12-day war then was about crippling infrastructure around uranium enrichment; this is about removing a leadership status that’s been in place for 40 years. We shouldn’t believe these things can be resolved quickly; this may take a while longer, and that leaves the volatility. There are two key things: the period of time this is going to take, and how impacted the infrastructure is – specifically the Straits of Hormuz and whether that oil can get out.

Sophia Mavridis: Oil and gas prices have surged due to potential supply disruptions, and European gas prices are increasing due to energy security concerns. What’s the impact on the ASX-listed stocks exposed to these sectors?

Will Riggall: Yeah, look, what we’ve had is a “usual” response. If we look back to 1973, there are 10 to 15 of these such events, and there’s largely a playbook. You have oil and gas stocks like Woodside and Santos performing well.

It might seem counterintuitive with geopolitical risks surging, but you do have gold selling off a bit because the US dollar rallies and we have higher rates. The US 10-year has moved back above 4%, so the concern at this stage is inflation. We won’t know for another month or two if these higher input prices for oil will slow the great momentum we’ve got in the global economy.

Markets hate uncertainty and we’re going to have this macro volatility. However, if we look at the averages across these periods of geopolitical events, markets are actually up in one month, three months, six months, and 12 months. The ASX responds really well because our economy is exposed to the positive impact of an inflationary environment. Our resources – BHP and Rio Tinto – usually do better, and as long as the economy remains stable, higher interest rates help bank margins. We need to remain calm and keep cash ready because opportunities will abound.

Sophia Mavridis: Do you think you’ll see more investors moving into cash at this time?

Will Riggall: There’s no doubt there is fear. In times of uncertainty, people look to safe havens like the US dollar or bond yields. But we really need to look at history. Largely, what plays out is that these end up being buying opportunities. Those who don’t raise cash, stay in the market, and maintain exposure to good quality companies are rewarded for keeping their heads.

Sophia Mavridis: It’s more of a market concern, then.

Will Riggall: Exactly. We’re dealing with macro and geopolitical issues where people are sometimes irrational, but that’s the fascinating thing about markets – we’re always learning.

Sophia Mavridis: Perhaps just one more question to end: What do you see regarding travel demand, airlines, and logistics companies right now?

Will Riggall: They are the first ones to be impacted. Global airlines have sold off, partly due to travel volume but also because oil is one of their highest costs. That uncertainty means that part of the economy will slow down.

While the big sell-offs have been concentrated there, other areas of the economy will benefit. The harsh reality of war is that things eventually need to be rebuilt, which creates demand for the commodities we dig out of the ground. There is a playbook for this scenario; hopefully, we can educate our clients and help them through this period.

Sophia Mavridis: Definitely. We’ll be keeping watch and keeping our clients updated. Will, thank you for joining us, and thank you all for watching this Friday.

This information is general in nature and does not take into account your financial situation, objectives or needs. You should consider whether it is appropriate for you. You should read our Financial Services Guide and any relevant Product Disclosure Statements before making an investment. For more information visit belldirect.com.au or call 1300 786 199. Bell Direct is the trading name of Third Party Platform Pty Ltd ABN 74 121 227 905, AFSL 314341.