We maintain an overweight stance on Australian government bonds; reflecting signs that cash rates may have peaked in this cycle, supported by ongoing global trade uncertainties. Our outlook on growth assets is more cautious; with tariffs likely to temper US economic momentum, and corporate earnings may be underappreciated as companies withdraw forward guidance. Consequently, we are adopting a more conservative stance, increasing cash holdings within diversified portfolios.
Within equities, we have a neutral view on Australian large cap equities. While unchallenging valuations and modest forward earnings leave a low bar for an upside surprise, we do not have sufficient conviction to overweight Australian equities given the subdued macro-outlook for Australia.
In currencies, we are underweight the US Dollar. While geopolitical tensions may temporarily boost safe-haven currencies, our longer-term view considers slowing global growth, high valuations and the potential fading of US exceptionalism; factors that could weaken the US Dollar further.
We will continue to monitor markets closely, adjusting our positioning as needed whilst seeking to optimise performance and manage risk. We remain committed to delivering you disciplined, strategic insights to support your clients’ long-term objectives.
Thank you for your continued trust in Mercer. We are here as a partner to your portfolio. Please do not hesitate to reach out to your Mercer representative with questions, or to discuss tailored strategies.
