Writing for Firstlinks, Redpoint CEO Max Cappetta shares his views on what investors should be looking for in the next reporting season.

From a local perspective, our economy is strong with low unemployment and household spending power (including more than $250 billion of extra savings since the pandemic arose). This is a good environment for corporations and their profitability, driving future shareholder dividends.

What remains under pressure is equity pricing as higher interest rates impact the valuation of shares. Notwithstanding such headwinds, there are still some areas of the market which are expected to fare better than average, and these include:

  1. Commodities – continued high cash flow on elevated prices and continuing long-term demand trends.

  2. Financials – improvement in net interest margin. We expect mortgage rates to increase alongside the RBA cash rate while interest on deposits will lag. Insurers will start to roll short-term investments to higher rates.

  3. Dividends – ANZ Bank’s results delivered an interim dividend of $0.72 per share (2.6% cash, 3.8% grossed up) for the half-year. Whether or not the banks pass-through rate rises to deposit holders, investors can still find good yields across a range of Australian equity market sectors. Share prices are volatile but they provide long-term growth to counter the effects of inflation while bank deposits and term deposits simply do not.

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