Earnings expectations don’t reflect the more aggressive monetary tightening expected by markets, says Randal Jenneke.
“The Federal Reserve is doing the same as the Reserve Bank is doing here; it’s out tackling inflation and bringing down demand. When demand falls, earnings fall, and then multiples come under pressure.”Macquarie echoed those concerns in fresh research on Wednesday, warning that rising rates will remain a headwind for stocks heading into 2023, and that a series of earnings downgrades lie ahead.
However, Macquarie cautioned that the Australian sharemarket’s decline this year isn’t over yet, urging investors to resist the temptation of buying beaten down stocks for now. Meanwhile, Mr Jenneke said T.Rowe Price’s Australian equity fund is the most defensively positioned it has been for over six years, excluding the pandemic.