Economics

On Ausbiz today, I discussed why the artificial intelligence (AI) boom may be reaching a crossroads. I looked at the enormous capital being deployed by hyperscalers, falling free cash flow and rising depreciation, and why growing competition and higher funding costs could make it increasingly difficult for these companies to generate sufficient returns on their AI investment.

Watch here: The AI spending spree investors should fear

by Roger Montgomery Posted in Economics, Editor's Pick, Insightful Insights, Investing Education, Market commentary, Market Valuation, Technology & Telecommunications, TV Appearances.

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The Financial Year 2026 (FY26) reporting season has concluded with corporate Australia in considerably better shape than many had feared.

Before getting too excited, however, it’s worth noting corporate Australia may not be in as good shape as the headline numbers suggest.

Aggregate profits rose by around 11.6 per cent.  Excluding mining and energy, however, the increase was just 5.3 per cent. Only 36 per cent of companies beat earnings expectations, below the historical average of about 40 per cent. Meanwhile, analysts have been cutting FY27 forecasts. continue…

by Roger Montgomery Posted in Companies, Economics, Editor's Pick, Feature Article, Insightful Insights, Investing Education, Market commentary, Market Valuation, Small Caps, Stocks We Like.

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Australia’s FY26 reporting season looked reasonably strong on the surface, with aggregate profits rising by around 11.6 per cent. But underneath the headline numbers, the recovery was much narrower – and investors were often more interested in what companies said about FY27 than the profits they had just reported.

I speak with Michael Thompson from Fear + Greed, about my 10 lessons from reporting season. We discuss why consumers are still spending but demanding value, expensive bank valuations, the limits of cost-cutting, opportunities in healthcare and why stock selection is becoming increasingly important. continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Feature Article, Insightful Insights, Investing Education, Market commentary, Market Valuation, Podcast Channel, Popular.

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The popular Australian economic narrative includes the argument the consumer is weak, and we are heading towards a recession.

But Australia’s latest retail earnings results are painting a more nuanced picture. In other words, the household sector is under pressure, but the pressure is not falling evenly.

Spending on essentials remains resilient, value-conscious consumers are still buying when the offer is compelling, and well-run retailers are protecting profit through better gross margins, lower costs and tighter capital discipline.

At the same time, however, the more discretionary categories continue to show weak traffic and softer like-for-like sales. continue…

by Roger Montgomery Posted in Companies, Consumer discretionary, Economics, Editor's Pick, Manufacturing, Market commentary, Market Valuation.

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I discuss our positioning in the big four banks and why we maintain a significant underweight. After a period of strong bank performance, we believe the outlook is shifting as credit growth moderates and economic conditions evolve, supporting our current positioning. continue…

by Sean Sequeira Posted in Economics, Financial Services, Market commentary, Market Valuation, Video Insights.

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If you follow financial news, like I do, you might have recently heard market commentator Trevor Hall summarise Treasury Secretary Scott Bessent’s latest move in a single eye-opener:

“He’s buying back bonds with 1 per cent interest rates at 50 cents on the dollar and replacing them with short-term debt that currently yields 3 and ¾ per cent.”

It sounds like a paradox. Why would the U.S. government buy back debt that costs them almost nothing (1 per cent interest rates) and swap it for debt that costs almost four times as much (3.75 per cent)? continue…

by Roger Montgomery Posted in Economics, Global markets, Insightful Insights, Investing Education, Market commentary.

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This week, the market’s most irrepressible bull, Ed Yardeni published another blog promoting his bullish thesis entitled, Peak Fear? Peak Yields? Peak Earnings? Peak AI?, alongside co-author Elias Griepentrog.

The headline gives away the framework because Yardeni and Griepentrog immediately answer the four questions in order:

Peak Fear? Yes.
Peak Yields? Maybe.
Peak Earnings? No.
Peak AI? No.

Let’s look at each argument in turn. continue…

by Roger Montgomery Posted in Economics, Market commentary, Market Valuation, Technology & Telecommunications.

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Australia’s housing crisis has reached a tipping point, but listening to the federal government, you’d be forgiven for thinking everything is running smoothly and under control!

2026 would have to be the first year the budget is still in the headlines three months after it was delivered. And that’s because it is proving to be an unmitigated disaster for the economy, investors, and homeowners, and now renters.

At the centre of the latest policy storm is the Treasurer Jim Chalmers and Housing Minister Clare O’Neil’s insistence – backed by Treasury ‘modelling’ – that recent tax adjustments impacting property investors will lead to a mere $2-a-week rent increase.

As an aside, we have to remember the almost universal failure of all modelling Labor has relied on, from electricity bill reductions of $275 by 2025 to house prices rising by a gentle two per cent. continue…

by Roger Montgomery Posted in Economics, Property.

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Well into the penultimate quarter of the calendar year, institutional and private investors face the paradox that record infrastructure capital expenditure, particularly by AI hyperscalers, coexists with heightened geopolitical risk, sticky inflation, and an apparent structural shift to the relationship between equities and bonds.

And if institutions are changing their asset allocations to reflect these shifts, should private investors do the same? continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Feature Article, Insightful Insights, Investing Education.

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If you haven’t noticed already, allow me to point out that investment discussions about artificial intelligence (AI) frequently devolve into almost insulting debates between AI evangelists, who cite massive total addressable markets (TAM) and explosive user growth, and sceptics, pointing to trillions of dollars in capital expenditure (capex), a buildout based on speculation, exorbitant compute costs, and an unclear path to profitability.

Aswath Damodaran, NYU Stern professor and widely respected value investor, believes this debate has largely gone off the rails, noting in a recent post, “The debate about AI, in my view, has gone off the track with advocates and sceptics often talking past each other”. Optimists cherry-pick usage metrics, while pessimists focus on heavy spending, with both sides ignoring the rigorous business analysis that needs to take place in the middle. continue…

by Roger Montgomery Posted in Economics, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications.

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