Transcript:

Hi, I’m Matt Wilkinson, 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 Friday lunchtime.

Australian equities have been resilient, with the ASX posting another strong month in August. The market was supported by a rebound in household consumption and optimism following the Reserve Bank’s recent rate cut. Spending has picked up as real incomes improved, helping GDP expand by 0.6% in the June quarter—the strongest pace in two years. This growth was driven largely by discretionary spending and a modest lift in consumer confidence.

Overseas, U.S. mega-cap technology companies continue to lead global markets. Nvidia (NAS:NVDA) in particular has delivered extraordinary results, with quarterly revenue more than doubling from a year ago on surging demand for AI chips. Its market value has risen sharply, but the stock now trades at more than 40 times forward earnings—roughly twice the multiple of the broader S&P 500. Microsoft (NAS:MSFT) and Meta (NAS:META) also posted strong growth in cloud services and digital advertising, together adding trillions of dollars in market capitalisation this year. While operational performance has been impressive, valuations across the sector are stretched, raising concerns about how much optimism is already priced in.

Trade policy also made headlines. A U.S. court ruling questioned the legitimacy of tariffs imposed under emergency powers, while the removal of the “de minimis” exemption—which had previously allowed imports under US$800 to enter tariff-free—will now see millions of low-value parcels hit with duties. This is expected to raise costs for global retailers and, over time, could feed into inflation and supply chains that matter for Australian consumers and businesses. Meanwhile, U.S. inflation is holding just under 3%, leaving the Federal Reserve with little room to ease policy quickly.

For portfolios, our approach remains disciplined. We are critical where we take equity beta, valuations in parts of the market are certainly stretched, but as long term investors, we see long-term opportunities in some unloved parts of the market, like global healthcare, the UK and European regions, and some emerging market countries. Above all, we remain diversified to balance resilience with growth potential.

Thanks for watching, and we’ll see you next week.