Darren Connolly

With geopolitical conflict driving energy prices higher, bond yields rising, tariff uncertainty persisting and artificial intelligence reshaping entire sectors, Australian investors are navigating one of the most complex environments in recent memory.

InvestmentMarkets has brought together views from 10 leading fund managers, market strategists and sector specialists across equities, fixed income, property, private credit and global macro to cut through the noise – each offering a distinct perspective on where the risks and opportunities sit heading into the second half of 2026.

Rather than a single house view, this collection captures the diversity of approaches investors are weighing – from global macro positioning and contrarian equity strategies through to unlisted property, mortgage funds and the new yield alternatives emerging on the ASX – highlighting why discipline and diversification matter more than ever.

Darren Connolly, CEO, InvestmentMarkets: “Most investors think they’re diversified, but true diversification means more than holding a few different stocks. It means exposure across asset classes, geographies and income sources – and it means having parts of your portfolio where the cash flows aren’t driven by market sentiment at all. That’s the gap we see most often, and it’s the one that hurts most in periods like this.”

Michael McCarthy, CEO, Moomoo ANZ: “I’m seeing signals from bond markets, currency markets, cryptocurrency markets, and share markets that are all lining up with the same message – growth is slowing and interest rates are headed higher. The best time to prepare for volatility is at the beginning when you devise your strategy. The next best time is when markets are going well. The third best time is now, because it’s never too late to act.”

Rudi Filapek-Vandyck, Founder, FNArena:“The share market outside of a very small selection of winners is now basically becoming a value proposition for investors who can look beyond the immediate headwinds. The whole AI narrative is a very long-term story. It’s going to change the world, have no doubt but the way it does is open for debate.”

Simon Raubenheimer, Director, Contrarius Investment Management: “It is tempting to get excited about shares that are down 70 to 80 per cent in a short space of time, but there’s a serious risk of buying a value trap. Our challenge is to be extremely disciplined in avoiding companies that face existential risks, even if they look cheap in the rearview mirror.”

Marc Jocum, Product and Investment Strategist, Global X:“The current dividend yield on the Australian share market is around 3.2 per cent, the lowest it’s been for decades. We are heavily weighted into financials and materials, which make up 50 to 60 per cent of the market, and significantly underexposed to the sectors projected to grow earnings at double digits. Don’t forget that earnings drive the majority of share market returns.”

Michael Saba, Portfolio Manager, Arculus Funds Management:  “The landscape has changed dramatically. Hybrids are being phased out, but that doesn’t mean they’re dead, there are still 38 issues and around $37 billion outstanding. What’s exciting is the range of new yield products emerging. It’s a sector that has just reached adolescence – it’s going through growing pains, and that’s good, because it will sort itself out.”

Nick Alcock, Australian Secure Capital Fund (ASCF): “Since October 2021, APRA has maintained a 3 per cent mortgage serviceability buffer. The unintended consequence is that we now see situations where hopeful refinancers can’t even service with their current lenders. Borrowers still need funding and projects still need finance, but the traditional banking system is no longer willing to provide it in some cases and that’s the gap private lenders have stepped in to fill.”

Vaughan Hayne, Managing Director and Co-Founder, Exceed Capital: “We’ve seen rents on the Gold Coast increase 40 per cent in two years, with A-grade office vacancy under 1.7 per cent, the lowest it’s ever been. Some of our A-grade buildings have moved from $460 to $650 per square metre. Construction costs and labour costs are at record highs, which means less new supply – which is generally a good thing for existing commercial property owners. Less supply, more demand, pushes up rental prices.”

Michael Fazzini, Sales and Distribution Executive, Capru: “The biggest insight in property development that most investors don’t realise is that most of the profit comes from what you pay for the land. Market price for land in our world isn’t the last transaction of a similar site or per square metre, it’s working backwards from what the finished product is worth, the build costs, and the minimum return needed to make the project viable. Get that wrong and no amount of execution can save you.”

Marcus Cleary, Head of Distribution, Oreana: “Volatility is a pricing problem, not a cash flow problem. Whether it’s tariffs, tech selloffs or oil shocks, the price volatility and breadth of that volatility isn’t seen within the direct asset class because the cash flows we deliver are linked to CPI and backed by long-term leases. Regardless of the economic environment, families are still sending their kids to childcare.”

Richard Collier, CFO, Heartland Bank: “Australians aged over 60 hold more than $3 trillion in property, yet less than 1 per cent of that available equity has been unlocked. The total reverse mortgage market is only around $5.5 billion against an addressable market of around $600 billion. With superannuation balances of just over $4 trillion across the entire system not sufficient to fund the lifestyle Australians expect in retirement, this is the largest store of value that remains untapped.”

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Marc Jocum

The timing of the February reporting season may prove an unexpected silver lining for Australian equities, as strong corporate earnings provide investors with a fundamental anchor at a time when geopolitical headlines risk dominating sentiment.

The Australian share market climbed 4% over February, its best reporting season since 2017, with companies overwhelmingly outperforming expectations.

Marc Jocum, Senior Product and Investment Strategist at Global X ETFs, said the February reporting season delivered a decisive turning point for local investors.

“While the ASX won’t be fully insulated from global risk-off sentiment, Australia’s commodity-heavy index is acting as a natural geopolitical hedge. Energy producers benefit from oil spikes, gold miners from safe‑haven flows, and critical minerals are supported by both geopolitical risk premiums and long-term AI infrastructure demand,” Mr Jocum said.

“This was a genuine blockbuster reporting season for Australian companies and a potential catalyst to lure investors back to the domestic market after years of underperformance versus global peers,” he said.

“Geopolitics may dominate headlines in the short term, but over the long run, it is earnings growth that ultimately drives equity markets. Reporting season served as a reminder that beneath the noise of global conflicts, corporate fundamentals remain the primary engine of long-term returns.”

Mr Jocum said earnings revision momentum is now the strongest in more than three years, and the market is pricing mid double‑digit EPS growth for FY26.

Resources and banks headlined the winners’ circle. Superloop (+28.3%), Lynas Rare Earths (+27.4%) and Iluka Resources (+25.9%) led the market, reflecting renewed demand for critical minerals and rising commodity prices. Financials also surprised to the upside, with Commonwealth Bank delivering its strongest single‑day gain in six years post-results.

Conversely, healthcare, technology and discretionary sectors lagged. Temple & Webster (-31.6%), Webjet parent WEB Travel Group (-30.1%) and Pro Medicus (-29.4%) were among the sharpest decliners as elevated expectations collided with softer guidance and margin pressure. Meanwhile, Australian consumers are showing a more cautious hand when it comes to discretionary spending, with a clear tilt toward essentials. The nation’s household savings ratio has climbed to its highest level since September 2022, suggesting households are choosing to rebuild buffers as they navigate the possibility of further tightening from the RBA.

Despite individual stock swings, broad‑based exposure proved a powerful advantage. The Global X Australia 300 ETF (A300) returned +4% in February, outperforming 72% of ASX 300 companies.[1]

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Marc Jocum

Global X ETFs (Global X) has brought to market the Global X S&P World Ex-Australia GARP ETF (ASX: GARP), the first index-based exchange traded fund (ETF) in Australia to offer a ‘Growth at a Reasonable Price’ (GARP) strategy for broad global shares.

GARP has a competitive management fee of 0.30% per annum and tracks the S&P World ex Australia GARP Index which holds 250 global companies. It is the only broad global share index ETF on the Australian market to combine growth, value and quality metrics into one solution.

Product and Investment Strategist, Marc Jocum said GARP is an innovative ETF strategy which empowers investors to incorporate companies with competitive growth profiles at reasonable valuations into their portfolios.

“Our GARP ETF strikes a balance between growth and value, providing international exposure to market-leading companies without sacrificing quality,” Jocum said.

“Some global share markets are currently trading above their historical long-term average valuation, potentially prompting investors to seek out companies with robust earnings growth and solid financial strength that are more reasonably priced.”

There are around 65 factor-based ETFs with $28 billion in assets under management listed locally, comprising 13% of the total market, with majority of the assets invested in quality and yield factors.^[1]

“Growth ETFs have primarily been actively managed, and the evidence shows that the majority of actively managed funds underperform a low-cost index over the long term,” Jocum said.

“Our GARP strategy is particularly timely as it aligns with the growing trend of investors seeking diversified global portfolios amidst local market volatility. By integrating growth and value metrics, with a quality overlay, GARP addresses the need for a core portfolio holding to handle various market cycles and has the potential to outperform the broader market.

“As ETFs are increasingly used to gain exposure to global companies with strong growth traits, we expect global equity ETFs to attract more investment flows given the concentrated and value-orientated nature of the Australian market.”

Jason Ye, S&P Dow Jones Indices’ Director of Factors and Thematics Indices, said, “In recent years, an index-based growth-at-a-reasonable-price (GARP) approach has been gaining traction among investors seeking strategies that effectively balance growth opportunities with valuation and quality considerations. The S&P World Ex-Australia GARP Index serves as an innovative benchmark, providing market participants with a unique opportunity to assess the performance of growth companies with high-quality and value composite scores beyond the Australian market.  S&P Dow Jones Indices is delighted to license the S&P World Ex-Australia GARP Index to Global X ETFs Australia for its new fund launch.”

Global X is dedicated to launching innovative ETFs to better serve investors, exemplified by the introduction of Australia’s first “three-in-one” Australian Bank Credit ETF (ASX: BANK) in July.

GARP adds to the company’s 40-strong ETF lineup across core, thematics, commodities, income and cryptocurrency. Global X now has more than $7.7 billion in assets under management.^[2]
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Notes:
[1] Global X using Bloomberg data as of 31 July 2024.
[2] As of September 2024.

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Marc Jocum

The Australian Exchange-Traded Fund (ETF) market grew 37.3% over the past year to $206.2 billion across 380 products, according to the Global X ETFs (Global X) Australia ETF Landscape report.

Growth was driven by more than $21.4 billion in net inflows, positive market movements, and the conversion of numerous unlisted active funds into active ETFs.

Product and Investment Strategist, Marc Jocum said, “It’s the strongest start ever for the Australian ETF market. In fact, we could surpass the calendar year record of $23.6 billion set in 2021, and potentially reach an industry valuation of $1 trillion by 2030[1] if this momentum continues.”

“It took nearly 20 years to reach $100 billion, but the next $100 billion was achieved in just over three years. Today, the Australian ETF market is growing at a faster rate than the US and has quadrupled its share in the Australian funds market over the past six years.”

Global shares ETFs were the year’s most popular asset class as Australian investors shifted to a ‘risk on’ position. Approximately $6 billion has been allocated to this category in 2024, representing 55% of the total market net flows. In 2023, bond ETFs were one of the most popular asset classes, capturing 37% of annual net flows.

“Artificial intelligence, regional pockets of investor interest, and fixed income are the three main trends which we expect will accelerate into the second half of 2024,” Jocum said.

Global X expects investment vehicles which are generally lower cost, like ETFs, will continue to steal market share over the next decade at the expense of traditional managed funds. Still, the market is in its infancy, with ETFs accounting for just under 5% of the total Australian funds market.

Head of Sales, Manny Damianakis said the Global X Australian ETF Landscape report has been a cornerstone for clients for more than eight years, aiming to empower investors to make informed decisions. Global X is committed to providing clients with intelligent solutions supported by industry-leading research.

“Our unique combination of international resources paired with local expertise allows us to explore innovative opportunities across thematic, income, commodity, digital assets and core solutions. Our expanding range of innovation-led ETFs reflects our investor-first philosophy of delivering the highest quality products to Australian investors,” Damianakis said.

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Notes:
[1] Global X, ASX and Cboe
[2] Assets under management as at May 2024, Global X
[3] Assets under management as at March 2024, Mirae Asset Global Investments
[4] Assets under management as at June 2024, Mirae Asset Global Investments

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