December 2025 Quarter - Video update

We expect small cap outperformance to continue over the next 12-24 months. Our ‘Bullish’ view regarding the performance outlook for small caps is unchanged. 

Post the recent AGM season, we have added several new exposures that look well positioned to deliver a recovery in earning growth over the next 12-24 months. We continue to identify a number of investment opportunities at attractive valuations.

The economy is expected to grow at a similar rate to last year. The labour market should remain robust, particularly given the backdrop of improving global growth. However, given the uncertainty regarding the interest rate outlook, some risks remain regarding consumer sentiment and discretionary spending. 

Business investment should grow in 2026 on the back of forecast spending for the Brisbane Olympics, defence-related infrastructure, data centre construction, mining expansion and energy transmission projects. Importantly, corporate earnings are expected trend higher in the year 12 months. Commodity and Capex investment trends continue to support positive earnings upgrades for the market. Morgan Stanley estimates that aggregate consensus earnings growth in FY26 now sits at +7.0 per cent vs the long-term trend of +4.0 per cent. While valuations are somewhat elevated, the risk of a market multiple de-rate is low in an environment where earnings growth is forecast to be above the long-term trend. 

The domestic Housing & Defence sectors are expected to make a strong contribution to the portfolio’s performance over the next 12-24 months. 

Our quarterly video below provides investors with additional detail regarding our equity positioning and a number of stock specific ideas.