Market Week in Review

Hi, welcome to the market weekend review for the week ending 8th of May 2026. My name is Alex Kruzie. I'm a portfolio manager based out of Sydney and there's a couple of things to go through this week. The first is it's been a pretty positive week for risk. So, equity markets are up uh globally. Uh and there's a couple of drivers for that. I think the first is the earning season in the US has continued to be very strong. We're running close to double uh what initial expectations had been. Tech is driving part of that but the story is quite broad. So small cap earnings, midcap earnings have been better than expected along with large cap. The AI capex thematic has continued. Uh we've seen a pretty big uplift in capital expenditure intentions for 2026. uh through this earning season and we've seen countries like Korea, Korea has had a very strong week and has continued that strong run on the back of demand for memory uh and chips on our sentiment measures. So the cycle we've been talking about we think is going from resilient to reaceleration uh and that's still the case in the United States. The rest of the world has a little bit of a headwind with higher oil prices but we still think is probably in that resilient camp. Um, our sentiment measures were slightly oversold at the end of March and have come back to very modestly overbought. So, sentiment is not yet an overhang for markets. We've seen um a little bit of um overbought indicators, but nowhere near the extremes that we would normally see to suggest that risks have built uh aggressively. The final bit that I think is worth noting is in rate space. So we've saw we've seen some reprieve in interest rates uh over the last week especially around the reduction in the Middle East uh tensions at least for now. Uh the other angle of interest rates that's quite interesting especially for someone living in Australia is we had the Reserve Bank of Australia meet. They have been a little bit out of cycle with the rest of the world. We've seen them raise rates twice up until now and they raised rates for the third time this year uh at their May meeting. Uh they're worried about inflation having picked up before the Middle East. uh Australia is in a very low productivity environment right now and so we have a bit of a handbreak in terms of how fast the economy can grow before inflation starts to pick up. The language around the statement was probably a little bit less hawkish than people had worried about. And so when we're looking ahead, we still think that Australian government bonds offer quite a bit of embedded value. Uh they're trading close to 5%. Uh that's quite a premium above the US 10ear uh and above our estimated fair value. And so we think it's a pretty good opportunity still um along with just government bonds in general we think offer better value than they did uh 2 or 3 months ago uh and should offer some diversification benefits should we see some volatility pick up uh around the growth environment so that's the main story we've seen a easing of the Middle East tensions earnings have been very strong especially in the United States that AIATIC has continued through the week and in Australia we had the RBA hike rates um bit less hawkish in terms of forward-looking guidance from them and we think the Australian government bonds still look pretty attractive on valuation. Thanks for listening and look forward to speaking to you next time. Hi, I'm Sophie Antaly, head of portfolio and business consulting at Russell Investments. If you liked what you just saw and heard, consider subscribing to our YouTube channel or check us out on LinkedIn. Thanks for tuning in.