Weekly Wrap 27 March

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 for another episode of our weekly wrap with our Chief Investment Officer, Will Riggall. Will, thanks for joining us this Friday.

Will Riggall: Thanks, Sophia. It’s been great to spend a bit of time with you and the team this week. I am currently up in Sydney visiting many companies and talking to clients, so we have a lot to get through today.

Sophia Mavridis: It was a big week; BFG sponsored the ASX Small and Mid Caps conference on Wednesday, where yourself and our lead strategist, Rob Crookston, provided the keynote presentation. We wanted to bring our clients those insights from the conference. On Wednesday, you talked about the outlook for equities over the next 12 months. What are your key insights there?

Will Riggall: Twelve months seems a long way away at this point. However, I’d encourage everyone to think about the market and the global economy as a moving beast that proves itself to be resilient. It responds and reacts to geopolitical and economic challenges over and over again. While we talk a lot about the conflict in the Middle East, this week we’ve been able to look back and understand why we were positive going into the start of the year. The reality is that those factors are still in play.

If we look at the general reflationary environment, we are seeing resilient global growth. There is no evidence in the current GDP and PMI data of a major economic impact. While some commentators suggest the conflict is a risk to growth, I’ve been taught not to jump at shadows and to follow the data, which remains relatively resilient.

Regarding the rate-cutting cycle, while some central banks are moving towards a neutralising or even a lifting position, it takes a while for those previous cuts to flow through. The backdrop is still positive from a fiscal stimulus perspective. While expectations have moderated and there is slightly less liquidity, valuations have come back a long way, so opportunities are becoming quite clear. The key risk is the timing around a resolution in the Iran-US tension. If we find a resolution in the next week or two, the reasons we were positive at the start of the year remain. We have confidence in the fundamental positives around AI, productivity, and fiscal stimulus supporting earnings. We are looking for catalysts and a clearer understanding of the issues, but as we stand today, we remain pragmatic and hold a positive outlook for global equities.

Sophia Mavridis: That is a lot of global noise. Thinking a little closer to home, what is your outlook for our local Australian market?

Will Riggall: The Australian market has certainly been impacted. If we look at the month-to-date performance, the ASX 300 has underperformed global benchmarks on both a hedged and non-hedged basis. We are seen as a “risk-on” environment because of our exposure to resources and the banks that support global growth.

Interestingly, the small-ordinaries component of the market has been hit hard, down double digits month-to-date. This comes after a period of earnings upgrades where EPS (Earnings Per Share) moved significantly higher. For the Australian market, the key risks are whether inflation will be sticky, potentially leading the RBA to implement more rate increases. That would be a headwind for the ASX.

In this environment, you look for resilient companies able to pass on price increases. We did get a CPI number this week indicating that inflation was still moving lower, which was a positive surprise. The broad backdrop for our economy remains positive, but again, the key is the ability to find a resolution to the Iran-US conflict. We are watching keenly with our finger on the trigger to act on opportunities as they arise.

Sophia Mavridis: You mentioned risk; what do you see as the single biggest macroeconomic risk or opportunity facing our local market?

Will Riggall: There are two sides to the ledger: economic growth, which feeds into corporate profitability, and the risk side, which is largely around inflation and liquidity. Markets can still perform well in slower growth environments; in fact, “bad news” can sometimes be “good news” if weaker economic data gives central banks the flexibility to respond.

While everyone is worried about a recession, what we actually need is stability in inflation. This would allow banking groups to pull the trigger on stimulus. Markets always look ahead and usually move price-wise before the earnings follow. That recovery is the key trigger we need to keep our minds on.

Sophia Mavridis: What are you currently finding to be the most compelling opportunity in the Australian market?

Will Riggall: There are a few, largely because some sectors have dealt with a “double whammy.” The IT sector, both domestically and globally, has been hit quite hard and somewhat indiscriminately. We are seeing strong opportunities there, perhaps in companies like WiseTech and Life360, which our research team covers. We should also consider second derivatives like the online classifieds space – high-quality businesses that have shown an ability to grow through time.

Secondly, the sell-off in the small-cap space has been stark. It was a great experience this week, Sophia, as you had the unique experience of sitting down with many of these CEOs. These companies have their own drivers and the ability to grow at rates above the top 100. If they have a niche and a high competitive advantage, they can grow independently of the global economy. I’d encourage everyone to watch those videos to hear from these companies with sustainable growth stories.

Sophia_Mavridis: Bell Financial Group did film exclusive content with those CEOs, which we will share with our clients next week. There is a lot of potential in the emerging small and mid-cap space. To wrap up, do you have a key message for our clients amid all this market noise?

Will Riggall: It is so important to learn from these periods and see them as opportunities rather than seeing them in fear. This is a chance to “high-grade” your portfolio. It is hard to think rationally when fear is the overbearing emotion, but it’s vital to react calmly.

If you enter these periods with a well-structured, diversified portfolio – across sectors, growth drivers, and asset classes – you remain resilient. A resilient portfolio might not run with the market during exuberant highs, but it gives you liquid access to capital when opportunities appear. That is when you really build long-term wealth. I look forward to providing more insights as we navigate this period.

Sophia Mavridis: Will, thanks for providing your expertise again this week. Have a good weekend, everyone.

Will Riggall: Thanks, everyone.

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.