Rate Sensitive Stocks
I'm holding a few rate sensitive stocks (CLW, CIP, DXS, APA, TLS). What's your view on these now given the current thinking around future interest rates. Thanks
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Answer
Hi Ian,
A well-timed question following Thursday’s Australian jobs report which saw the unemployment rate fall to 4.3% from September’s 4.5% effectively killing off the possibility of an RBA rate cut until further notice – the futures market is now pricing in a less than 40% chance of a 0.25% rate cut before next Christmas.
- We don’t believe the RBA will cut rates in 2026, a period of “No change” seems most likely.
We made the decision to reduce our overweight exposure to rate-sensitive stocks following the red-hot Q3 inflation print at the end of October – at the time we sold Mirvac (MGR) while retaining National Storage (NSR) and Goodman Group (GMG) in our Active Growth Portfolio – all 3 have since traded lower.
At this stage, we don’t believe portfolios should be skewed towards rate cuts through 2026/7 with inflation sticky and employment improving. However, individual stocks should be judged on their merits depending on the portfolios/investor’s objective. Of the stocks mentioned, CLW will be most impacted by the change in interest rate expectations.
