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Crispin Murray’s weekly ASX outlook

Here are the main factors driving the ASX this week according to our head of equities Crispin Murray. Reported by portfolio specialist Chris Adams.

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SEVERAL themes are emerging from Australia’s reporting season:

  • The Australian economy is in good shape with a strong outlook
  • Companies that have been challenged for some time by Covid disruptions are responding well and positively surprising the market
  • Labour availability and inventory management have been a challenge for some companies
  • US-based businesses are seeking to put through material price rises

Globally, the valuation de-rating of growth companies and concern over the Ukraine weighed on equity markets last week. The S&P 500 fell 1.5% and the NASDAQ was down 1.7%.

A generally good menu of corporate results helped support the local market, which ended up 0.2%.

Year to date, the S&P/ASX 300 is -2.9% versus -8.6% for the S&P 500 and -13.3% for the NASDAQ.

This week’s action underpins our view that Australian equities are generally more defensive in the current environment.

Macro-economic news


There was little newsflow last week. Our view remains that financial conditions — including asset markets — need to tighten further for any real chance of inflation cooling.

Headline inflation data may moderate in coming months due to the base effect. But US economic momentum looks to be strengthening.

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For example, company survey data from researcher Evercore ISI indicates the US economy continues to pick up following the most recent Covid wave.

This is supported by Bank of America credit card data and air travel sales. Housing is staying resilient despite mortgage rates moving higher. This may reflect pent-up demand and supply constraints.

Meanwhile monetary policy remains loose. This is not consistent with the need to bring inflation down, which is becoming a political imperative given the mid-term elections in November.

Fed Chair Powell is still yet to be officially confirmed for another term. The process has been delayed by wrangling in the Senate over the appointment of Sarah Bloom Raskin to a key regulatory role at the Fed.

If this situation drags on it raises an outlying risk that Powell may not be confirmed if he is failing to quell inflation. This is arguably putting more than the usual political pressure on the Fed.


There are two very different perspectives on the Russia-Ukraine stand-off.

The first is that Putin is almost certain to invade in the next couple of weeks and is trying to engineer a pretence to do so via claims of an unwarranted act from Ukraine.

The other is that the US is overstating the risk to put pressure on Putin and reframe Biden’s image.

The outcome remains to be seen.

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History suggests any sell-off in risk assets in response to military action will be relatively short lived.

If a solution is found, it could see the oil price back down to about $80 very quickly — particularly if the market starts to price in the possibility of a new deal with Iran.

This would give Biden some relief on the inflation issue, with high fuel prices becoming an acute political problem.


The domestic economic looks primed for a period of strength thanks to a combination of:

  • Pent-up demand supported by excess savings
  • Border re-opening as cases numbers fall
  • Labour market and wage strength
  • Renewal of immigration
  • Policy — rates remain low and we are likely to see a stimulatory pre-election budget

Employment-to-population ratios continue to climb. There is little evidence of the “great resignation” seen in the US.

The job market also looks strong, based on Seek’s job ads data, which continues to climb to 10-year highs.

Immigration is also recovering quite quickly, helped by a near-term boost from returning students. 

This all bodes well for aggregate corporate earnings, which can help protect the domestic equity market from the valuation de-rating seen elsewhere. 


The rotation away from growth continues.

Speculative tech names declined again after a recent small bounce. Meanwhile mining stocks continue to climb. 

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It was interesting to note some positive noise on gold last week. The gold price is up 5.8% for the month and has broken out a recent technical range, helped by geopolitical concerns.

This needs to be watched. Gold miners have been material underperformers for almost two years and when they do run, they tend to do so sharply.

There is a lot of debate on the link between real rates and gold. There has been a strong negative correlation in recent years (as real rates rise, gold underperforms). This has helped entrench bearish sentiment recently.

There is an argument that relationship held in the Quantitative Easing era where gold was a hedge against deflation.

Now there is a view we may see correlations between gold and real rates return to the pre-GFC era, when gold was held as a hedge against inflation. 

Flows in gold ETFs are only now just beginning to turn positive, so sentiment is not over extended. Iron ore fell 11.8% as Beijing clamped down on speculative activity by traders. But underlying demand and economy strength appear to be constructive, supporting a price in the low US$100 range. 

About Crispin Murray and Pendal Focus Australian Share Fund

Crispin Murray is Pendal’s Head of Equities. He has more than 27 years of investment experience and leads one of the largest equities teams in Australia. Crispin’s Pendal Focus Australian Share Fund has beaten the benchmark in 12 years of its 16-year history (after fees), across a range of market conditions.

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management. 

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This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at February 21, 2022.

PFSL is the responsible entity and issuer of units in the Pendal Focus Australian Share Fund (Fund) ARSN: 113 232 812. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund.

An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested.

This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation.

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