Sam Heithersay

“The Australian market has proven its resilience through a volatile year to date. The enduring effects of the US-Iran conflict will present yet another test of this resilience. The Reserve Bank of Australia (RBA) was in the unique position of lifting rates to combat inflation before war broke out. Rising fuel costs and rates have already taken their toll on consumer and business sentiment but capacity utilization remains high and the labour market tight. Several companies have already reported rising expenses that cannot be absorbed, and consensus forecasts continue to indicate a hawkish stance from the RBA.

“Resources provides some ballast in the local market to help offset these swings in domestic consumer and business sentiment on resurgent inflation and rising rates. Global commodity demand remains robust underpinned by a healthy global capex cycle, notably the AI driven data centre build out. Energy insecurity will add impetus to global renewables build out and EV demand as well as the reconfiguration of global critical mineral supply chains already underway. Rising fuel costs could undermine these margin tailwinds but will be very unevenly distributed and history suggests that the sector in aggregate outperforms during inflationary periods.

“The first phase of AI disruption has disproportionately benefitted a narrow set of AI infrastructure enablers and foundational model pioneers to the detriment of markets like the ASX that have neither. But the next phase could see more diffusion and adoption of AI for operational transformation. We believe Australia is well placed to benefit from this AI diffusion, and our assessments of the ASX highlight meaningful differences in how companies are progressing in AI adoption. AI has the potential to reset long-held competitive advantages and we’ve drawn on historical parallel examples of disruptive technologies to conclude that companies who adapt and pivot rather than just defend their existing competitive moat make better long-term investments.”

Zara Lyons, portfolio manager, Fidelity International, comments: “Australian equities remain an attractive opportunity, though a selective approach is warranted given a macro backdrop that is still restrictive enough to prevent an indiscriminate re‑rating of the broader market. Elevated inflation, restrictive interest rates, geopolitical tensions, ongoing conflict and fiscal policy adjustments are contributing to weakening sentiment from consumers and businesses alike. Inflation has re-accelerated above the Reserve Bank of Australia’s target range, leading to expectations that interest rates could tighten further.

“This setup argues for staying focused on sectors with either structural growth, strong pricing power, or balance-sheet resilience, rather than relying on falling discount rates to do the heavy lifting. This is especially important in Australia, where the market is dominated by financials and resources, so performance is heavily influenced by what happens to banks, iron ore, and broader commodity pricing rather than by a balanced cross-section of the domestic economy.

“As we go deeper into 2026, sectors such as insurance, communications, healthcare, diversified financials and select consumer staples are expected to remain resilient or improve as the year progresses, benefiting from stable demand, pricing power and defensive characteristics.

“Over the longer term, Australia continues to benefit from strong structural advantages, including high standards of corporate governance, an attractive dividend yield relative to global peers and a large, low-cost natural resource base. These factors underpin a broad opportunity set capable of delivering attractive risk-adjusted returns over the cycle.

“Against this backdrop, a selective approach to Australian equities is warranted, with a focus on areas exposed to the country’s long‑term structural growth drivers and supported by bottom‑up fundamentals. The environment continues to favour companies with sustainable competitive advantages, strong management teams and resilient business models. As macro and monetary policy dynamics continue to evolve, attention is expected to remain on areas where improving end‑market conditions support earnings durability, alongside a disciplined approach to valuations.”

By Sam Heithersay, portfolio manager

The post Fidelity International Australian equities market outlook appeared first on AdviserVoice.

Zara Lyons

Fidelity International has appointed Zara Lyons as portfolio manager within its Australian equities team.

Zara is based in Sydney and will have responsibility as lead portfolio manager for the Fidelity Australian High Conviction Fund, including the ASX-listed vehicle (FHCO.AX) and associated mandates, with effect from 10 June 2025.

Zara is a highly experienced investment professional with more than 25 years of experience in Australian equities. She joined Fidelity in 2017 as an investment analyst, covering the Australian Healthcare sector and later Australian Financials. Prior to joining Fidelity, Zara worked at CLSA, Nomura and RBS Equities, as a Healthcare analyst, and at JP Morgan Research and ABN AMRO covering other sectors, both in Australia and the UK.    

Zara will take up her portfolio manager responsibilities from Casey McLean, who will leave Fidelity in June 2025 for an external opportunity. 

Paul Taylor, head of investments, Australia, Fidelity International comments: “Zara’s many years of investment experience and strong track record in delivering research-driven results make her the right choice to lead this important solution for our clients. Zara is also a great example of internal talent progression and will play a central role in delivering great client outcomes within our Australian equities product range.

“We thank Casey for his decade of service and wish him all the best for his future endeavours.”

The post Fidelity International appoints Zara Lyons as portfolio manager  appeared first on AdviserVoice.

Paul Taylor

While the impact of rising interest rates and inflation is still to be fully felt in the market, there are still pockets of opportunity for stockpickers within certain sectors, according to portfolio managers at Fidelity International.

Paul Taylor, head of investments at Fidelity International, says Australia will most likely avoid a recession, although it’s not entirely off the table.

“While we think many developed markets will head into recession later this year, our view is that Australia is in a good position to avoid the worst.

“If we do head into a recession, it will be fairly shallow.  Australia is in a stronger position than other developed markets because of our links to better performing Asian countries as well as higher population growth from immigration. Nonetheless, the best-case scenario is that we see a slowdown in Australia.

“Central banks around the world have moved quickly to get on top of inflation and avoid the pervasive inflation experienced during the 1970s. They are now taking a pause to see how economies react and what the next steps will be.

“In Australia, there are indications we are getting close to the peak for both interest rates and inflation. The real test for whether we go into a recession or not, is consumers and how they adjust. Consumer behaviour is lagging behind the interest rate cycle and there is still some pain yet to be felt.

“While there are a number of risks in the market, this also creates a great opportunity to buy the market at a much better risk-adjusted price, which will likely deliver much better longer-term returns,” Mr Taylor says.

Maroun Younes, co-portfolio manager of the Fidelity Global Future Leaders Fund, agrees that a number of sectors stand out.

“The tech sector has been delivering strong earnings and has an optimistic outlook. It is benefiting from ongoing structural growth in areas such as data centres and the cloud, networks and connectivity enablers, software to create productivity or critical information management, artificial intelligence, and content platforms.

“Looking ahead, earnings will be a significant driver of share prices during the next 12 months. The drivers of sustainability of earnings will also be important considerations – for example, pricing power and market structures, as well as the discretionary nature of consumer spending. Businesses that can withstand any softness in the economic environment will also likely be well sought after.

“As the risk of recession or economic slowdown flows through the economy, these considerations will determine valuations, meaning that stock picking will be critical,” Mr Younes said.

Casey McLean, portfolio manager for the Fidelity Australian Opportunities Fund, also sees opportunities in a number of sectors in the Australian market.

“Commodities and building materials – in particular consumption-related commodities – are looking attractive at the moment. Consumption-related commodities are those that are exposed to structural growth elements such as decarbonisation; for example lithium, copper or rare earths, and are not running into a headwind of weak Chinese property demand.

“We also think the insurance sector is one of the beneficiaries of the current inflationary environment as inflation means insurers are able to increase their premiums. We are also experiencing a high level of natural disasters, both in Australia and in markets like the US, which pushes up claims inflation, reinsurance rates and ultimately insurance premiums. Further, a higher interest rate environment means insurers are able to earn good returns on the investment of premiums. Overall, the outlook for their earnings looks pretty strong over the medium term.

“Another area that is somewhat overlooked is small cap equities. They have underperformed over the past two years but as the cycle turns, conditions will be substantially more favourable for them and many will be in a strong position,” Mr McLean says.

Zara Lyons, portfolio manager for Fidelity’s Australian Equities Fund, says that the bank sector is well prepared to weather a downturn, but the market will likely focus on asset quality in upcoming results.

“Since the RBA paused hiking rates in July, market expectations for two 25 basis point increases in the cash rate have eased slightly to one 25 basis point increase, following a weaker monthly inflation figure. This, combined with a slight softening in competitive dynamics across both mortgages and deposits, has led to a share price rally in banks, which have outperformed the broader market over the last few months.

“However, we think this rally may be short lived if the economy deteriorates further from here. The yield curve continues to be inverted implying that the market expects slowing economic growth in the future and potential easing in policy rates,” says Ms Lyons.

Mr Taylor adds that against the macro-economic background, equity markets now present a much more interesting opportunity.

“History teaches us that when significant risks are priced into equity markets, they’re more likely to provide better longer-term investment returns. There’s plenty to worry about, but that also creates better opportunities for the future,” he says.

The post Markets buying opportunities abound for careful stockpickers appeared first on AdviserVoice.