Transcript:

Hi, I’m Bianca Rose, Senior Portfolio Manager at Morningstar Investment Management. Welcome to the Morningstar Market Minute, a video series where we explore markets, the economy, and other notable trends every week. We’ll start by discussing key market events, Morningstar’s outlook, and how our portfolios are positioned for the current environment.

What have been the key market events this week?

Japanese equities markets reacted strongly to the Japanese election results, after Prime Minister Sanae Takaichi received a resounding vote of confidence, with her party winning over a two-thirds majority position, the first time this has occurred in the post-war area. Looking across the rest of Asia, we also saw Asian technology stocks, particularly semiconductor names in Korea and Taiwan, do well. This follows from the announcements last week that massive AI-related capex spending plans are expected to continue. Alphabet estimates its 2026 AI-related capex will be around US 180 billion in 2026, which is a 100% increase on what it spent in 2025, and Amazon has guided its capex to reach US 200 billion in 2026, a 50% increase year on year.

Turning our attention back to Australia, we saw a few notable results come through during reporting season. Commonwealth Bank of Australia (ASX:CBA) jumped almost 7% on Wednesday after the company delivered stronger earnings growth than the market’s expectations. On the other side of the equation, we saw biotech company CSL (ASX:CSL) fall by over 15% this week so far after delivering disappointing earnings results and its CEO was pushed to the side. The Australian dollar rose above 71 cents against the US dollar, on expectations that the RBA will continuing raising interest rates to curb high inflation levels.

What is your outlook based on these events?

We expect continued uncertainty around who will be the AI winners and losers over the next few years, and how profitable will the massive capex investments being made by the US Big Tech stocks turn out to be.

How are Morningstar’s portfolios positioned to respond?

As always, we continue to use valuations as our guiding “north star” when making buy and sell decisions. We have been selling areas of the markets that have continued to do well this year—for example, Korean equities, while looking for buying opportunities in areas that have underperformed.