Rich Dell, global head of equities at insurance broking and risk management giant Marsh, has urged investors to brace for a potential end to the four-year bull run. Marsh, an insurance broking and risk management firm, manages approximately US$16.2 trillion in assets under advisement. Dell’s caution follows recent pullbacks in global and local sharemarkets, with the S&P500 declining and the ASX hitting a three-month low. Renewed Middle East tensions have pushed Brent crude prices above US$105 a barrel, while Australian 10-year bond yields have reached their highest level since 2011, fueling inflation expectations.
These dynamics underpin expectations for further Reserve Bank of Australia interest rate hikes. Global bond yields are pressured by government debt and rising corporate debt, exemplified by “hyperscalers” like Alphabet (behind Google and Gemini) raising US$5 billion for AI development. US 10-year government bond yields briefly topped 5 per cent, and Australian 10-year bond yields climbed to a 15-year high. Dell argued that while the S&P500’s “phenomenal” earnings growth offered protection, the combination of potentially unsustainable growth, soaring bond yields, and higher oil prices could now trigger a market correction.
In contrast, BlackRock’s global chief investment strategist, Wei Li, returned to an overweight recommendation for emerging markets, citing benefits from semiconductor demand and AI-related resources. Li believes higher rates and strong equities can coexist if earnings growth outweighs risks from rising borrowing costs and Middle East tensions. Domestically, UBS equities strategist Richard Schellbach noted that only ASX energy and utilities sectors were aided by higher rates, with real estate and retail facing the steepest challenges. Major companies including Stockland, Mirvac, Wesfarmers, JB Hi-Fi, and Seek are expected to feel significant earnings pressure.
Reflecting this outlook, Jun Bei Liu, a portfolio manager at Ten Cap, has taken a short position against residential property developer Stockland. Liu anticipates fewer residential settlements, lower margins, and increased borrowing costs, positioning her fund to profit from a potential share price decline.
