10k Words

Equitable Investors

 January 2026

(2-minute read)

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We kick off calendar 2026 by trying our hand at our own sentiment indicators - combining valuation and implied volatility for the US equity and bond markets, the Aus equity market and ASX small caps. Are investors paying a premium price for market calmness? Then we check in on Morningstar's bottom-up valuations. There is a chasm between small and large cap valuations based on revenue multiples but not so much on earnings. Tech has done the heavy lifting in large cap valuation AND earnings in the US over the past decade and the trend is expected to continue - but can US smalls deliver on lofty targets and drive a catch-up? In US dollars, the US market has underperformed most major markets in the Americas. Then we look at how short-term (daily) volatility itself is becoming more volatile over time. Turning to the economy, we look at personal loan delinquencies and savings rates, with signs of deterioration in consumer behaviour.

A custom US equity market sentiment score - based on CAPE adjusted equity risk premium and the VIX relative to their historical average and volatility

Source: Equitable Investors

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A custom ASX equity market sentiment score - based on the dividend yield spread on bonds and the ASX VIX relative to their historical average and volatility

Source: Equitable Investors

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A custom ASX small cap sentiment score - based on the dividend yield spread on bonds and realised volatilty relative to their historical average and volatility

 

Source: Equitable Investors

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A custom US debt market sentiment score - based on 10 year bond yield and MOVE Index of implied volatility relative to their historical average and volatility

Source: Equitable Investors

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Market price relative to US market bottom-up valuations from Morningstar

Source: Morningstar

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Market price relative to ASX market bottom-up valuations from Morningstar

Source: Morningstar

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Earnings: US Tech vs the Rest

Source: Topdown Charts

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Actual reported and bottom-up consensus EPS growth estimates

Source: Goldman Sachs Global Investment Research

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Enterprise Value / consensus sales - S&P 500 (IVV ETF) v US microcaps (IWM ETF)

Source: Koyfin

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Enterprise Value / consenus EBITDA - S&P 500 (IVV ETF) v US microcaps (IWM ETF)

Source: Koyfin

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Price / consenus EPS - S&P 500 (IVV ETF) v US microcaps (IWM ETF)

Source: Koyfin

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Country ETF performance over past 12 months (in USD)

Source: Koyfin

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No. of daily 10% swings per calendar year in the VIX (CBOE Market Volatility)

Source: Iress, Equitable Investors

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No. of daily 10% swings per calendar year in the S&P/ASX VIX

Source: Iress, Equitable Investors

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Personal Loans - 90+ Delinquency (#)

Source: Equifax

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Australian savings ratio

Source: RBA

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USA personal saving

Source: St Louis Fed

Funds operated by this manager:

Equitable Investors Dragonfly Fund

Disclaimer

Past performance is not a reliable indicator of future performance. Fund returns are quoted net of all fees, expenses and accrued performance fees. Delivery of this report to a recipient should not be relied on as a representation that there has been no change since the preparation date in the affairs or financial condition of the Fund or the Trustee; or that the information contained in this report remains accurate or complete at any time after the preparation date. Equitable Investors Pty Ltd (EI) does not guarantee or make any representation or warranty as to the accuracy or completeness of the information in this report. To the extent permitted by law, EI disclaims all liability that may otherwise arise due to any information in this report being inaccurate or information being omitted. This report does not take into account the particular investment objectives, financial situation and needs of potential investors. Before making a decision to invest in the Fund the recipient should obtain professional advice. This report does not purport to contain all the information that the recipient may require to evaluate a possible investment in the Fund. The recipient should conduct their own independent analysis of the Fund and refer to the current Information Memorandum, which is available from EI.

Hedge Clippings | 16 January 2026

Looking forward, Looking back, Welcome back!

In 2025, there were a number of major themes that dominated markets and the news, and which in turn influenced returns of the various peer groups and the managed funds operating within them.

Equity-based funds continued to benefit from the tailwinds of strong global equity markets, which saw the S&P 500 (T/R) deliver just shy of 18%, while the ASX 200 lagged that at 10.32%. The 542 equity-based funds in AFM's database averaged a return of 13.2%, with 55% of them outperforming the ASX 200.

However, averages can be misleading! Fund selection remained (as ever) critical to success, with individual fund results ranging from -20% through to an impressive return of 294%.

The question for investors and fund managers alike is whether the dominant themes of 2025 will continue into 2026? There's no reason to think they won't, and there's no reason that just rolling over from December 2025 into January 2026 will mysteriously change last year's trends.

Global Technology and AI:

The tech juggernaut, and particularly the focus on AI, rolled on - or did it? The bottom line is that the "Magnificent 7" became a "Dominant Duo" consisting of Alphabet and Nvidia.

The so called Magnificent 7 averaged a return for the year of 27.5% outperforming the S&P 500 by a clear 10%, but that hid that fact that Alphabet (Google) and Nvidia were up 65%, and 40% respectively, while Microsoft (15%), Meta (13%), Apple (8%), and Amazon (6%) all underperformed the S&P 500.

Elon Musk's Tesla, the last of the Mag 7, rose about 15% to be broadly in line with the market, having scored a few own goals, and distractions during the year.

Artificial Intelligence dominated markets. It seems unlikely the focus and adoption of AI will wane - if anything, it is likely to continue to expand and dominate, but with question marks around stretched valuations, energy, and at a stock level, which horse to back there are likely to be both winners and losers.

Gold, Precious metals, and Resources:

In 2025 gold rose 65%, silver was up almost 150%, platinum 127%, while copper rose over 40%. Critical minerals and rare earths became both valuable and a geopolitical point of leverage.

Not surprisingly, funds investing in resources, in part or exclusively, dominated the top-performing tables in 2025, with the Top five returning between 102% and 294% in 2025.

As can be seen, resources are cyclical. Will the drivers of the precious metals boom continue? As always, there are those saying "this time it is different,"  although the queues of retail punters lining up in Martin Place each morning outside the bullion dealer suggest a toppy market.

Geopolitics and the Trump Factor:

The Trump Factor is one theme we're confident will remain in 2026. In the first two weeks of the year, Trump is dominating the headlines as only he can, including threatening the regime in Iran, kidnapping the President of Venezuela, eyeing off Greenland, and, closer to home, continuing to bully Jerome Powell (or trying to) into lowering interest rates. The problem for investors is that it is difficult to predict his unpredictability!

If he persists with his intention to absorb Greenland, it is likely to end the NATO agreement - but maybe that's his ulterior motive?

News | Insights

Investment Perspectives: Thinking about A-REITS | Quay Global Investors

Affordability is a hot button issue for 2026 | Magellan Asset Management

December 2025 Performance News

Bennelong Australian Equities Fund

4D Global Infrastructure Fund (Unhedged)

DS Capital Growth Fund

Bennelong Concentrated Australian Equities Fund

Glenmore Australian Equities Fund

Bennelong Emerging Companies Fund

Airlie Australian Share Fund

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