It is easy to dismiss the recent underperformance of Australia vs US (global) equities as a market with too much exposure to rising energy prices and not enough exposure to a booming technology sector. That is a simplistic assessment of the current backdrop.Underperformance is being driven by more than this. Inflation is running too hot, and it is forcing the RBA to raise rates into an energy-driven cost-of-living crisis. In addition, the tailwinds from global growth, falling policy rates and China’s investment cycle are fading fast. Unlike the consensus, we don’t think the Australian market is due for a catch-up trade. In fact, we expect underperformance to widen further – even in USD’s where a stronger $A is providing a marginal kicker. Read more in this months AFR Market Minds column.
