A Message from Mike
The Quiet Advantage: Staying Positioned in a Noisy Marke
January often brings a subtle pressure to “reset”. It tempts us to tear up the script, chase new leaders, and look for a crystal ball that doesn’t exist. There is a common misconception that the first 31 days of the year should provide immediate clarity on the next 300. In reality, the start of 2026 has been a masterclass in adjustment, not direction.
Navigating the “Repricing” Phase
We are currently living through a period where market sentiment is shifting faster than the underlying data. We have moved from a narrative of “up only” to a more discerning “show me the money” environment. This volatility often feels uncomfortable, but for active managers, it is the most fertile hunting ground we have.
We are currently seeing two distinct signals that the market is misreading:
The Microsoft “Overreaction”: There is no better example of short-term myopia than the recent reaction to Microsoft’s earnings. The market punished the stock over short-term cloud capacity constraints, effectively ignoring the bigger picture where demand is outstripping supply.
When a company with the world’s strongest balance sheet sells off because they can’t build data centres fast enough to meet customer orders, that is not a warning sign. It is a dislocation. In our view, this pullback has rendered one of the world’s highest-quality assets “cheap” relative to its growth profile. We view this not as a structural failure, but as a rare window of opportunity to own a compounder at a discount.
The “Silent” Consumer Strength: While headlines scream about a recession, the actual data coming out of companies like Amazon and Costco tells a different story. The US consumer, who remains the engine of the global economy, is not collapsing. They are prioritising.
We are seeing sustained volume growth in high-value retail, suggesting that while the “easy money” economy is gone, the real economy is far more resilient than the bears would have you believe.
Preparation vs. Reaction
My focus during this volatility isn’t the day-to-day movement. It is whether your portfolio is structured to sit through this phase without needing a manual override. This is where resilience quietly shows its value. When a portfolio is built with balance, early-year turbulence feels less like a warning sign and more like a reminder of how markets actually work.
Assumptions are challenged, and capital moves around. This process looks messy on a screen, but it is precisely what creates long-term opportunity. By holding firm on high-conviction names like Microsoft during a dip, and balancing them with the defensive cash flows of consumer staples, we avoid the “whipsaw” effect that destroys so much retail capital.
The Signal
We aren’t chasing the “hot hands” of the first few weeks. We are far more interested in how the portfolio behaves across the full range of economic conditions.
The Value of Standing Still
I often see investors mistake motion for progress. A strong January can tempt people to over-leverage, while a soft patch can provoke a retreat from strategies that haven’t actually failed. These instincts are human, but they are rarely profitable.
In a market where algorithms react to headlines in milliseconds, the greatest edge an investor can have is patience. We have the structure to handle the noise and the conviction to see through the current pricing errors. Our job now is not to react, but to let the quality of our holdings do the heavy lifting.
The Advice Desk
Protecting Your Most Vital Asset in 2026
Welcome to 2026. As we move into February, the “wait and see” approach of late last year has officially ended. Today, the Reserve Bank of Australia (RBA) met for its first session of the year, and the decision is a stark reminder of the economic reality we face. With underlying inflation remaining stickier than forecast at 3.8%, the Board has made the difficult decision to raise the cash rate.
While much of the daily conversation is focused on how this impacts asset prices, I want to pull your focus toward the foundation of every financial plan. This is the one asset most impacted by today’s news: Your ability to earn.
The Most Important Asset You Might Be Ignoring
We often insure our homes, our cars, and even our travel plans without a second thought. Yet, for many, their most significant asset, their future earnings capacity, remains under-protected or reliant on “default” cover.
Today’s rate hike changes the math. As we navigate an even higher cost-of-living environment in 2026, the stakes for Income Protection (IP) have never been higher. If you haven’t reviewed your cover since the major APRA sustainability reforms of previous years, you are likely navigating an outdated map.
Why It Matters (Now More Than Ever)
An income protection policy typically pays a monthly benefit of up to 70% of your salary if you are unable to work due to sickness or injury. In 2026, that “30% gap” is more significant than it used to be. Consider these questions in light of today’s RBA decision:
If your income stopped tomorrow, how would you cover a mortgage that is now costing hundreds more per month than it did just yesterday? Would you be forced to liquidate investments during a period of market volatility to survive?
Would you have to rely on family, or could you maintain your independence?
The “Default” Trap
Many Australians rely on the cover provided automatically through their superannuation. While this is a baseline, it is rarely a complete solution. Default cover is often “one size fits all” and typically lacks the “Own Occupation” definitions that high-earning professionals require.
“Own Occupation” ensures that if you cannot perform your specific role (e.g. a surgeon or a specialised engineer), you are paid. Default “Any Occupation” policies may only pay if you cannot perform any job suited to your education. In a highinflation world, that is a risk you cannot afford to take.
Next Steps
Given the RBA’s move today, now is the time to stress-test your defensive strategy. Please reach out to the advice team if you are unsure whether your current definitions match your current lifestyle.
The Investment Engine: February 2026
The End of “Wait and See”
Today’s decision by the Reserve Bank of Australia (RBA) to raise the official cash rate confirms exactly what we have been signaling: the “wait and see” era is officially over. With underlying inflation remaining stubbornly sticky at 3.8%, the central bank has been forced to act, shattering the market’s hopeful consensus of early easing. While the headlines will inevitably focus on the pain this inflicts on borrowers, within our portfolios, this move validates the structural adjustments we have been making over the last 12 months. The volatility we are seeing on screens isn’t panic. It is a rational “repricing” of risk in a world where capital just got more expensive.
The “Silent” Outperformance of Defence
Perhaps the most telling signal from the last year is the strength of our defensive and balanced models. In a period often characterised by “growth at any cost” narratives, our Haven Portfolio (Conservative) and Meredian Portfolio (Balanced) have delivered steady 1-year returns of 4.7% and 5.7% respectively. Today’s rate hike is precisely why these portfolios are constructed this way. In a rising rate environment, “boring” assets are the biggest winners.
- Cash is King (again): Our significant allocation to Major Bank Hybrids (approximately 30% within Haven) is particularly well positioned following the RBA’s decision. Hybrids pay an income stream that is primarily made up of a fixed margin (the risk premium) added to the 3-month Bank Bill Swap Rate (BBSW), which is closely linked to the RBA cash rate. As a result, when the RBA raises rates, the income generated by these securities typically increases.
While AAA-AU (8% in Haven) — which invests in Australian dollar cash, bank deposits and short-dated, high-quality securities — means a meaningful portion of the portfolio is also benefiting from higher prevailing cash rates. Rather than simply preserving capital, these allocations are contributing to portfolio income and setting a higher hurdle for growth assets to outperform.
- The Private Debt Advantage: This is the specific environment where MXT-AU (weighted at 6% in Conservative) shines. Because these assets typically have floating interest rates, the income they generate rises in tandem with the RBA cash rate. While the equity market sells off on rate fears, this “silent engine” in your portfolio just received a fuel injection.
Growth: The “Quality” Shield Against Higher Rates
Moving up the risk curve, the “Earnings Dispersion” we noted earlier becomes even more critical now that money is more expensive. Our Summit (Growth) and Aurora (High Growth) portfolios have posted returns of 5.9% and 6.1% respectively, but the path forward requires strict discipline.
Higher rates naturally compress the valuations of growth companies, as future earnings are worth less when the discount rate rises. This is why we have tilted these portfolios away from generic “market beta” and heavily into “Quality” factors.
Why Quality Matters Now: You will notice significant weightings in QUAL-AU and QHAL-AU (combined ~15-16% in growth models). This is our answer to the RBA’s hike. We are prioritising companies with low leverage and fortress balance sheets because, unlike in 2024, debt is now a liability rather than a tool. This “Quality” filter acts as a sieve, catching the resilient earners while letting the speculative froth wash away.
The Horizon Portfolio: Understanding the Currency Headwind
We must address the Horizon Portfolio (Global Growth), which recorded a 1-year return of -0.4%. While it is tempting to attribute this solely to tech volatility, the primary driver is actually the AUD/USD exchange rate.
Because this portfolio is priced in Australian Dollars but holds US assets (like Alphabet and Nvidia), it is subject to currency translation effects. Today’s RBA rate hike acts as rocket fuel for the Aussie Dollar. When our local interest rates rise relative to the rest of the world, global capital flows into the AUD, driving its value up.
- The “Ruler” Changed: As the AUD strengthens, each US Dollar of profit our companies generate is worth less when converted back into Australian Dollars. The underlying businesses are performing exceptionally well. Alphabet and Costco are still printing cash, but the “ruler” we measure them with (the AUD) has effectively stretched.
- Why We Don’t Hedge: We accept this volatility because over the long term, the currency acts as a natural shock absorber. In a true global crisis, the AUD typically falls, which boosts the value of your offshore assets when you need it most. Today’s headwind is simply the price we pay for that long-term safety mechanism.
Infrastructure: The Inflation Hedge
Finally, the RBA raised rates because inflation is “sticky” at 3.8%. The best hedge against the cause of the rate hike (inflation) is to own the assets that can pass those costs on.
By holding VBLD-AU and IFRA-AU across our risk-based models, we are owning the toll roads, utilities, and airports that have inflation-linked pricing power. These assets provide a “floor” to the portfolio, ensuring that while tech valuations might wobble on the news, the physical backbone of the economy continues to pay rent.
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