Market commentary

Every time the stock market stumbles a percentage point or two, headlines invariably scream the same ominous question: Is the big market crash finally here?

It’s easy to sympathise with investor nervousness, despite the S&P500 being less than three per cent from all-time highs. Tensions overseas are triggering spikes in energy prices as strategic reserves are depleted, inflation persists at rates well above central bank preferences, interest rates remain unpredictable, and tech valuations and AI-related spending seem perpetually stretched.

But look beneath the surface of recent market pullbacks, and a different picture emerges.

It helps to understand the mechanics of market volatility, which isn’t about predicting the exact day a dip will happen, but rather recognising the difference between run-of-the-mill turbulence and structural damage. continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, Insightful Insights, Investing Education, Market commentary, Market Valuation.

• save this article
• POSTED IN Economics, Editor's Pick, Global markets, Insightful Insights, Investing Education, Market commentary, Market Valuation

On the surface, markets appear remarkably resilient, so if you’ve felt a sense of calm looking at your portfolio performance lately, you aren’t alone.

But look beneath the surface and the structural fragility you’ll see in valuations, government debt, and global trade makes holding a narrow, concentrated equity portfolio (including any portfolio largely invested in index ETFs) one of the more dangerous bets an investor can make right now. continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, Insightful Insights, Intrinsic Value, Investing Education, Market commentary, Market Valuation, Popular, Technology & Telecommunications.

• save this article
• POSTED IN Economics, Editor's Pick, Global markets, Insightful Insights, Intrinsic Value, Investing Education, Market commentary, Market Valuation, Popular, Technology & Telecommunications

How to respond

Across my articles and media commentaries, I have emphasised that preparing for an artificial intelligence (AI) re-pricing is not about timing a top or shorting tech, but rather about protecting capital through discipline, factor balance, and liquidity.

There are five primary strategies to insulate an investment portfolio from an AI re-rating:

1. Diversify away from equity index heavyweights

Broad, passive equity indices (such as the S&P 500 or Nasdaq) are historically concentrated. Passive flows into index funds mean a significant portion of an investor’s exposure is tied to six or seven AI-driven mega-caps.

Rebalance away from broad index funds that leave up to 60 per cent of equity risk tied to the AI trade. Investors might also consider locking in recent gains and diversifying equity exposure across unsung, non-AI themes. continue…

by Roger Montgomery Posted in Aura Group, Economics, Insightful Insights, Investing Education, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications.

• save this article
• POSTED IN Aura Group, Economics, Insightful Insights, Investing Education, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications

Last week, Google reported its first ever quarter of negative cash flow, surprising analysts who thought Q1 2027 would be when pressure on cash flows could seriously emerge, and causing the share price to plunge more than seven per cent.

With the clear exception of Tesla, most of the Mag 7 once deserved high earnings multiples because they were asset-light businesses with competitive advantages that didn’t require money to be defended. The artificial intelligence (AI) race has quickly eroded those moats and their characterisation as asset-light, because, over the last two years, they have had to spend hundreds of billions building data centres to remain competitive. continue…

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

• save this article
• POSTED IN Economics, Insightful Insights, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications

If you’ve been following the technology headlines, you might be confused by two seemingly contradictory statements. The first is that artificial intelligence (AI) is becoming dramatically cheaper to run, and the second is that tech companies are spending more money on AI compute than ever before.

How can we reconcile these statements, and what does the conclusion mean for companies like Pro Medicus (ASX: PME), Xero (ASX: XRO), NEXTDC (ASX: NXT), Megaport (ASX: MP1) and others?

If the unit price of AI is plummeting, shouldn’t the overall costs be going down? And if AI software is taking over the world, shouldn’t every startup building an AI application (App) be printing money?

To help explain the apparent dichotomy, you need to understand a 160-year-old economic concept called Jevons Paradox that’s currently being referenced everywhere and said to be driving the entire AI industry. continue…

by Roger Montgomery Posted in Companies, Energy / Resources, Insightful Insights, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications.

• save this article
• POSTED IN Companies, Energy / Resources, Insightful Insights, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications

I joined Jess Maguire on ABC Statewide Drive to discuss how the rise of passive investing is changing the sharemarket, with index funds increasingly pushing money into the biggest companies regardless of valuation. Using SpaceX as an example, we explored how speculative companies can attract enormous valuations during periods of market optimism, and why that may not last forever. We also looked at what this means for Australians, many of whom may have exposure to these trends through their superannuation.

Tune in from 1:45:22 on ABC Statewide Drive continue…

by Roger Montgomery Posted in Market commentary, Market Valuation, Radio.

• save this article
• POSTED IN Market commentary, Market Valuation, Radio

I joined Juliette Saly on Ausbiz to discuss how the rise of passive investing is reshaping markets. With ETFs and index funds now dominating trading, quality-focused active managers are struggling as money flows into the biggest index constituents regardless of valuation or fundamentals. While this trend may continue for some time, market cycles eventually turn, and when they do, companies with strong fundamentals, high-quality balance sheets and durable cash flows are likely to come back into favour.

Watch the episode here: The “profitless rally” Roger thinks could end badly continue…

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

• save this article
• POSTED IN Economics, Editor's Pick, Global markets, Insightful Insights, Investing Education, Market commentary, Market Valuation, TV Appearances

When I wrote Value.able in 2010, ‘Quality’ as an investing factor was gospel, a foundational truth: buying fundamentally superior businesses at reasonable prices and holding them over the long run was the surest path to wealth creation.

Individuals like Warren Buffett, Charlie Munger, Mohnish Pabrai, Seth Klarman, Howard Marks and Terry Smith proved, over decades, that Quality rules. Superior Return on Capital Employed (ROCE) or Return on Equity (ROE), high gross margins, and consistent Free Cash Flow (FCF) conversion inevitably compounded a company’s equity, and ultimately produced outsized returns for investors in those businesses. continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Insightful Insights, Investing Education, Market commentary, Market Valuation.

• save this article
• POSTED IN Economics, Editor's Pick, Insightful Insights, Investing Education, Market commentary, Market Valuation

In my latest article for The Australian, I argue that the S&P 500 is no longer the diversified benchmark many investors believe it to be. With an increasing share of the index now driven by the artificial intelligence (AI) theme, concentration risk is at extreme levels. History suggests these periods don’t last forever, making quality companies and genuine diversification worth a closer look.

Download the article here: AI boom turns S&P 500 into a dangerous bet

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, In the Press, Investing Education, Market commentary, Market Valuation.

• save this article
• POSTED IN Economics, Editor's Pick, Global markets, In the Press, Investing Education, Market commentary, Market Valuation

Treasurer Jim Chalmers stepped up to the dispatch box in May 2026 to announce a sweeping overhaul of negative gearing and capital gains tax (CGT).

By stripping negative gearing from established properties purchased after May 12 and swapping the 50 per cent CGT discount for an inflation-indexed method and a 30 per cent minimum tax floor from July 2027, the Albanese Labor Government claimed to be setting out to achieve a progressive holy grail. Putting aside that this was nothing more than another tax grab to plug a budget hole born of profligate spending, fiscal waste and mismanagement, they claimed to be tilting the playing field away from wealthy property hoarders and toward aspiring young first-home buyers.

Two months later, the early data is in. And while the reforms have successfully detonated a bomb under housing market activity, the fallout has been completely twisted. Instead of ushering young Australians into their dream homes, Labor’s housing policy has locked them out faster than ever. continue…

by Roger Montgomery Posted in Economics, Market commentary.

• 2 Comments
• save this article
• POSTED IN Economics, Market commentary