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Hedge Clippings | 03 July 2026
Let's look at the RBA Minutes first: The RBA's minutes from its 15-16 June meeting, released this week, confirmed the board held at 4.35% but kept the door open to further tightening, citing "excess demand and widespread inflationary pressures". Persistently weak productivity was flagged as a standing concern; unit labour costs remain above their inflation-targeting-period average despite wages growth in line with expectations, since output per hour isn't keeping pace. The board also linked flat equity prices partly to limited local AI-boom participation. CBA, ANZ and NAB all read the tone as hawkish but were split on the implications: CBA sees a hold through 2026, but with upside risk; ANZ is flagging an August rise if Q2 CPI surprises on the high side; and NAB reads it as confirmation the cash rate has peaked. Which one is on the money will depend on the June CPI due on 29th July, and PPI due 2 days later. But with the RBA not due to meet until 10-11 August, two weeks before the July CPI due on August 26th, there's going to be some crystal ball gazing around the board table. Complicating things will be the slide in the oil price thanks to the US-Iran de-escalation (assuming it holds), but offset by the reintroduction of the other half of the fuel excise levy, and lingering supply-side inflation still filtering through the system. Back to the ASX FY25-26 Close While the Australian equity market as a whole was lacklustre at best, particularly when judged against the S&P500 or Dow Jones, there was an extreme divergence between the sectors and companies that drove average returns, and those that dragged them down. A 48% materials rally carrying an entire index to a mid-single-digit total return (inclusive of dividends) says as much about concentration risk as it does about the benefit of diversification. Strip out rare earths and iron ore, and FY25-26 looks considerably flatter, and argues loudest for active management and offshore diversification vs. passive index investing. Source: IG Australia, ASX 200 FY close report The ASX 200 closed the financial year up 6.3% including dividends. Materials led at +48.2% on a rare earths and lithium re-rating, but even within the sector there were standouts: Mineral Resources (+186.9%), Lynas Rare Earths (+115.2%), Iluka Resources (+93.1%), plus Rio Tinto (+63.0%) and BHP (+62.4%) all leading the charge. While accepting averages can be misleading, stock selection, manager and fund selection, are vital to beating the index. While individual stock prices are known, fund performance for June 2026 is still pending. However in the 12 months to the end of May, just over 50% of equity funds on AFM's database outperformed the ASX200. Choice of the right sector, and fund, or funds, is obviously key. The top 10 over the past 12 months to May have returned between 75% and 126%, a list not unsurprisingly dominated by Resource Strategies such as Terra Capital, Argonaut and Paragon. By comparison, investing in a passive ASX200 Index strategy would force the investor to accept the good, the bad, and everything in between for a return of just under 7%. Finally, US Non-Farm Payrolls June's US jobs report delivered the softest headline in four months: payrolls up just 57,000 versus 115,000 expected, with April and May revised down a combined 74,000. Leisure and hospitality shed 61,000 roles on weak seasonal hiring. Notably, the month Goldman Sachs had modelled a 40,000 World Cup hiring boost that didn't materialise. Unemployment fell to a 12-month low of 4.2%, driven by a 720,000 plunge in the labour force rather than stronger hiring, pulling participation to 61.5%, its lowest since March 2021. Fed Chair Warsh's 17 June comment that labour data was "moving in a good direction" now reads as cover for an extended hold, with June CPI (14 July) the next catalyst. A falling unemployment rate built on a shrinking labour force is a weaker signal than the headline suggests. It buys Warsh time but doesn't resolve the tension between inflation and a cooling jobs market, worth watching alongside the RBA's own next move. Donald will want to focus on the US birthday celebrations this weekend, rather than the job numbers. News | Insights 10k Words | Equitable Investors Netflix: Navigating deals, AI and growth | Magellan Investment Partners May 2026 Performance News Bennelong Emerging Companies Fund |
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