Market Commentary – March 2026

Quarter in Review: High Volatility Amidst Global Tensions
The Australian equity market experienced a transformative first quarter in 2026, marked by extreme performance swings. After reaching a record high of 9,202 points in February, the S&P/ASX 200 encountered a sharp 10% correction in March. This sell-off effectively reversed the year’s early gains, leaving the index at 8,481 points—a quarterly decline of 2.7%.

The primary catalyst for this downturn was the escalating conflict in the Middle East, which triggered global energy security concerns and drove oil prices higher. Consequently, inflationary pressures have resurfaced, prompting the Reserve Bank of Australia (RBA) to implement interest rate hikes in its first two policy meetings of the year. Market consensus currently points toward a further increase in May.

Corporate Performance: The February Reporting Season
The February reporting period revealed a strengthening corporate sector, with aggregate earnings improving for the first time in three years. Key thematic trends included:

• Divided Consumer Sentiment: A “two-speed” consumer economy has emerged. While older, high-net-worth Australians maintained discretionary spending, younger households and those with high mortgage debt significantly curtailed outflows. This led to a “trading down” effect, benefiting value-oriented retailers like Wesfarmers (Kmart) while challenging high-end brands.
• Resources Dominance: The materials sector saw a significant resurgence. Majors such as BHP and Northern Star reported substantial profit growth and record dividends, underpinned by peak pricing in copper and gold. Notably, BHP’s earnings from copper surpassed those from gold, signalling a structural shift in market demand.
• Technological Disruption: While the tech and healthcare sectors faced valuation de-ratings due to concerns over AI-driven disruption, financials such as CBA and IAG were rewarded for successfully integrating AI to drive productivity gains.
• Capital Management: A record $3.4 billion was returned to shareholders through buybacks, reflecting robust balance sheet health across the ASX 100.

Portfolio Positioning: Limberg Asset Management
While the broader index moved approximately 10% during the quarter, individual stock volatility was far more pronounced, with some positions fluctuating by over 50%. Some of the holdings within portfolios have experienced greater volatility than that of the market. These include MAF and QAL which reach new highs only to have significant pull back when the March Volatility commenced. We have spoken with both these companies which are owned and operated in Australia and the growth and market outlook for both these companies is extremely positive. Large cap stock such as BHP and Macquarie Bank had significant pull backs during early March but look to have bounced back late March early April. All of these companies provided positive half yearly updates and paid a dividend in the past 3 months.

Our strategy involved building cash from the income and dividend payments.  The current market conditions have created volatility and we continue to monitor quality companies to add these to the portfolio at discounted prices which portfolios will benefit from in the future.

Income Strategy and Outlook
Despite broader market noise regarding credit markets, our income-focused holdings remain fundamentally sound. Throughout the quarter, we conducted deep-dive reviews with MA Financial, Qualitas and Metric Credit Partners . We have confirmed that asset quality and valuations remain robust, mirroring the resilience seen during previous periods of market stress, such as the pandemic and the onset of the Ukraine conflict. Negative press regarding international credit managers  with exposure to tech companies have been sold down due to the rapid adoption of AI products causing greater scrutiny in the sector. All of the credit within our investment portfolios is predominately Australian based and backed by real assets with predictable income generation which can provide valuation protection in these volatile markets.

We view the current market dislocation as an opportunity to acquire high-quality income assets at a discount to their underlying value. Additionally, as interest rates rise, the yields on these products are expected to increase proportionally, further enhancing the income returns for our clients.

We appreciate your continued trust during this complex market cycle. We remain available to discuss these developments and our investment principles at your convenience.