My Thoughts
Patience, Discipline, and the Power of Time
Warren Buffett retired at the age of 95 after more than 60 years leading Berkshire Hathaway. Over that period, Berkshire’s share price rose from approximately US$19 in 1965 to around US$755,400 in 2025.
An investment of US$100 in Berkshire Hathaway in 1965 would be worth approximately US$4 million today, underscoring the impact of disciplined long-term investing, patient capital allocation and compounding over time.
Market & Economic Backdrop
Australia
Australia faces a pivotal period. Without meaningful reform to taxation, regulation and energy policy, the risk is a continued drift in competitiveness and pressure on living standards. Durable progress will require policy settings grounded in economic outcomes rather than short-term or ideological considerations.
Global
Global markets enter 2025 with positive momentum, supported by resilient economic activity and easing financial conditions. Equity markets rebounded strongly into year-end, led by the United States and AI-linked technology sectors, while volatility declined and risk appetite improved.
The US economy continues to demonstrate resilience. Household consumption remains supportive of growth, corporate earnings have generally exceeded expectations, and inflation has moderated from its peak. However, labour markets remain relatively tight and policy remains data dependent. Markets continue to anticipate further interest-rate cuts, though the timing and magnitude remain uncertain.
In Asia, China’s economy remains uneven. Export and industrial activity have stabilised, but domestic demand continues to be constrained by property-sector stress and elevated local government debt. Policy support is ongoing, but confidence remains fragile.
Elsewhere, India and parts of South-East Asia continue to benefit from favourable demographics and domestic demand. Japan is transitioning away from ultra-accommodative monetary policy as inflation pressures gradually re-emerge.
Asset Class Performance & Key Themes
Equities
Global equities have delivered strong returns, though performance leadership has been narrow. Large-cap technology and AI-related sectors have dominated gains, while dispersion across regions, sectors and styles has widened. Valuations in parts of the market leave less margin for error, increasing sensitivity to earnings and policy outcomes.
Fixed Income & Credit
Higher interest rates have restored income to portfolios. High-quality bonds, investment-grade credit and select hybrids continue to offer attractive yields relative to risk. However, early stress signals are emerging in lower-quality credit markets, reinforcing the importance of credit selection.
Commodities & Real Assets
Gold and other real assets have benefited from geopolitical uncertainty and inflation-hedging demand. Energy markets remain structurally tight, with ongoing implications for inflation and economic competitiveness.
Australia
Domestically, inflation has surprised to the upside, particularly across energy, housing and services. Market expectations for rate cuts have been pushed out, and the risk of tighter financial conditions later in the cycle has increased. At the same time, concerns around productivity, regulatory burden and energy costs are weighing on Australia’s long-term investment competitiveness.
Outlook
Looking beyond the immediate cycle, 2026 is shaping up as a transition year—one in which the cumulative effects of higher interest rates, policy decisions and structural reform (or the lack of it) become more visible across economies and markets.
Globally, growth is expected to moderate as the lagged impact of restrictive monetary policy works its way through households and businesses. While central banks may begin easing policy, interest rates are unlikely to return to the ultra-low levels that characterised the decade prior to 2020. Inflation risks remain asymmetric, particularly if energy costs, geopolitical tensions or fiscal expansion re-accelerate price pressures.
Equity markets in 2026 are likely to be more valuation sensitive. Earnings growth will matter more than multiple expansion, and leadership is expected to broaden beyond a narrow group of large technology and AI-linked companies. Businesses with strong balance sheets, pricing power and disciplined capital allocation should be better positioned.
In Australia, 2026 will be a defining period. The trajectory of living standards and international competitiveness will increasingly depend on progress in productivity, energy policy, taxation and regulation. Without reform, the risk is a continued drift toward slower growth and higher structural costs. With reform, Australia retains significant advantages—natural resources, institutional stability and human capital—that could support a re-acceleration in investment and income growth.
For investors, 2026 reinforces the importance of portfolio resilience. Income, diversification and liquidity will remain critical, while opportunities are likely to emerge from volatility rather than sustained market momentum. Patience and discipline, rather than aggressive positioning, are likely to be rewarded.
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