Australia is poorly positioned for a supply-side driven energy shock. This explains why the equity market has been underperforming global equities despite being low beta and low growth. It imports energy and thereby inflation and exports growth while having very few hedges against a geopolitical shock such as defence. However, while relative performance is to an extent understandable, there is a lot of fear around the macroeconomic and market outlook based on opinions feeding negative headlines rather than the facts. The energy shock is creating problems, but we don’t think they are as large as many opinions are suggesting.
