Hi Nick,
A lot in that question so we’ll focus on the retail component. The first point to make is that not all retailers are the same, we saw this divergence in performance at the 1H results where retailers selling smaller items held up while those selling bigger ticket things struggled. We’ll get more granular detail on this at FY23 results shortly. From a sector perspective, while we think there will be opportunities ahead, we don’t think we’re there yet. We want to really see the delayed impact of higher rates on spending. We think only a small portion of the pain is being felt now, and belts will need to be tightened more which obviously has negative implications for retail.
We don’t believe in staying away from a sector indefinitely. We believe in continually monitoring it for signs of change, that the worm is turning, don’t forget that things are cyclical, and tough periods create opportunities, we firmly believe that will be the case in the retailers at some point. The main signal to monitor here is quarterly sales results from the sector. When the majority of sector constituents show early signs of ticking up collectively, that is when we will get more bullish from an overall sector perspective.
At a macro level, bond yields peaking and falling sustainably will be a sign that mortgage rates will be coming down, turning a headwind into a tailwind.
