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Hedge Clippings | 17 April 2026
Wall Street's Bright Side Blindness There is something slightly odd about watching the S&P 500 notch fresh record highs while the Middle East remains unstable, oil markets are distorted, and the IMF is warning that a prolonged energy shock could drag the global economy towards recession. Investors are clearly trading on hope: hope that diplomacy holds, hope that supply disruptions ease, and hope that inflation does not get a second wind from higher oil, gas, and fertiliser costs. Hope can be a powerful market force. It is not always a reliable economic indicator, and certainly not a good basis for an investment strategy, in spite of the number of punters who rely on it. The problem is that higher energy prices rarely stay confined to petrol stations and trading screens. They work their way through freight, food, manufacturing, and household budgets, lifting inflation while leaning on growth at the same time. That is the real risk now facing policymakers globally, and Australia will not be spared if the pressure persists. The RBA has already flagged that higher prices and prolonged uncertainty could weigh on growth both abroad and at home, while its February Statement noted that tensions around Iran posed upside risks to oil prices. That leaves the Reserve Bank in a distinctly awkward position when its Monetary Policy Board next meets on 4-5 May. By then, it will be staring at a familiar but deeply uncomfortable combination: inflation risks that argue for caution, and slower growth that argues for support. Treasurer Jim Chalmers is due to hand down the federal budget the following week, having already said the government is pulling the budget together with these global developments very much in mind. So while the government is doing its best to steady consumer nerves, both the RBA and the Treasurer are now treading the same tight rope. Lean too far in one direction and you risk worsening the growth scare. Lean too far in the other and you risk adding fuel to inflation at exactly the wrong time. It is not an enviable policy backdrop, particularly when so much of the shock is being imported, and neither interest rates nor fiscal policy can magically lower the global oil price. Against that backdrop, the red ink across fund strategies in March looks less like panic and more like reality asserting itself. With around 75% of funds having reported so far, losses have been broad-based. Small-Cap Australian equities have been hit hardest, down an average 10.19% for the month, with a handful of funds falling more than 20%, and some closer to 30%. Having said that, 53% of equity funds outperformed the ASX 200 in March, a sharp improvement on the February number of just 10%. Wall Street may still be looking on the bright side. Australian fund returns, however, are already dealing with the darker one. On the positive side, while the falls have possibly been overdone, there'll be some attractive pickings at very reasonable prices when the dust settles. News | Insights
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