Confession Season Fast Approaching, Investors Waiting For Guidance

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The Australian equity market is now at a ‘sit-and-do-nothing’ season as investors have nothing to do but wait on data and information before re-engaging their buy-and-sell activities.

Australia is fast approaching the ASX confession season. In confession season, listed companies reveal whether they’re on track to hit the earnings guidance for the August reporting season.

The confession season is critical for fund managers and investors as it will offer better and more realistic guidance on the direction of the markets. Investors would have a better bearing on what they want to do next.

While waiting for the season, which should be expected at the start of May, this will be signalled by the annual Macquarie equities conference scheduled on 2 May. Interestingly, the Reserve Bank of Australia (RBA) is also expected to announce its plans for cash rates on the same day.

Many brokers need help with getting their clients into trading at this time. This is also the same with equity capital markets across Asia and worldwide. 

According to Rob Nash, head of equities relationships for ASX, this is expected. Nash commented that the risk appetite has changed, partly due to the Ukraine invasion. This led investors to take more defensive assets as part of their portfolios. 

“There were ten consecutive rate rises and, depending on whether you believe the IMF or OECD, we are either already in or maybe about to enter into a period of economic weakness. From that point of view, many fund managers are saying, is now the time we want to be in equities, or do we want to be as conservative as possible?”

Peter Warnes, head of equities research with Morningstar, noted that the Australian equities market would see further downgrades. He advised investors to add companies that generate maintainable free cash flow in their portfolios. Warnes said that investors should seek expert guidance and consider diversifying their investments in the oil and tech sectors. These sectors have been showing good cash flow in recent months.

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