On the eve of reporting season, a global wealth manager has recommended investors adopt a more defensive attitude in their portfolio allocations stemming from an uncertain outlook regarding the remainder of 2026.
The firm noted companies will soon provide an indication of their full-year performance and what they expect for the next 12 months and this will be a key focus for the market.
ECP Asset Management partner Andrew Dale suggested the current environment is difficult to read, noting while the last year has been challenging, the focus is now on future company performance.
“The sense we are getting is that there is a lot of uncertainty. The waters are muddied,” Dale explained.
He indicated inflationary pressures on wages, energy and freight continue to affect business costs and while consumer sentiment has been resilient, a shift in behaviour is expected.
To this end, he anticipated households will start to reallocate spending across different categories rather than maintain their overall expenditure. This could create a more difficult outlook for some companies, especially in the retail space.
While a business like JB Hi-Fi may be insulated due to its flexible model, furniture providers such as Nick Scali and Temple & Webster could face challenges, he suggested. However, other retailers like Lovisa may be more resilient due to their younger target market.
Dale also recognised supermarket chains, including Woolworths and Coles, tend to be seen as safe havens for investors because of their dependable defensive positions.
According to Dale, even though some sectors will face challenges, other market segments, such as technology industries, will provide opportunities for investors.
Here he pointed to Megaport as a company at the beginning of its next growth phase and singled out TechnologyOne for its successful integration of artificial intelligence.
He pointed out healthcare is another sector worth considering and highlighted ResMed as a key pick, noting its strong market share and consistent earnings performance. He argued these factors make it an obvious choice for investment consideration.
Overall, he predicted most companies will communicate a more difficult outlook.
“Defensive is the way to play it leading into the back half of the year,” he noted.