Responding to a Shifting Global Policy Landscape

Markets remain skittish as investors grapple with the dramatic and unpredictable policy shifts under the Trump administration. These developments have triggered widespread volatility and heightened macroeconomic uncertainty.

In response, we have made targeted portfolio adjustments in April - reducing exposure to areas most vulnerable to tariffs and slower global growth, while tilting towards more domestically-oriented, resilient earnings streams.

Equity Market Context

• Equity markets have quickly priced in significant downside risks. While earnings impacts are yet to materialize, valuations have come down meaningfully (S&P 500: from 22x to ~19x; ASX 200: from 18.5x to ~17x).

• The greatest impact has been felt by companies directly exposed to tariffs or cyclical global demand. By contrast, defensives and more domestically-oriented businesses have shown relative resilience.

Portfolio Adjustments

• In response to the new US tariff regime and rising macro uncertainty, we’ve reduced exposure to sectors most directly impacted by global trade and cyclical risk.

• The portfolio is now more aligned with domestic-facing companies that offer stable earnings and minimal first-order tariff exposure.

• This shift is supported by Australia’s current policy backdrop: strong government spending, record employment, and the RBA’s capacity to ease if needed.

Stock-Level Changes

• Our portfolios continue to favour industry leaders, companies with higher-quality earnings, and resilient balance sheets.

• We remain overweight Industrials, Healthcare, Utilities, and Consumer Staples.

• We hold a neutral position in Materials (overweight Gold) and have reduced our underweight to Financials, adding to Insurance stocks AUB and Suncorp.

• In Healthcare, we’ve added to Ramsay (hospitals) and reduced the overweight to US-exposed names like CSL and ResMed.

• We’ve added to REITs, primarily through Vicinity Centres.

• We’ve reduced exposure to Energy due to its sensitivity to global growth concerns.

• We were early sellers of both Goodman and WiseTech Global, both of which have fallen substantially since our exit.

Cash & Outlook

• We’ve retained higher cash weightings, allowing flexibility to buy as opportunities present themselves.

• While market turbulence may persist in the near term, volatility creates openings to invest in high-quality businesses.

• While we see selective opportunities, we remain mindful of the potential for further non-linear risks as the global policy landscape continues to evolve.