April, 2026
Monthly Commentary
Paradice Australian Equities Team
Paradice Australian Equities Fund April 2026 Commentary
Performance
The portfolio returned 229bps, and outperformed the S&P/ASX200 Total Return Index (ASX 200) by 11bps over the month net of fees1.
Key Contributors/Detractors
Positives
- Macquarie Group (Overweight) – outperformed, potentially due to improved sentiment and profit expectations
- CSL (Underweight) – underperformed, possibly on concerns of further earnings weakness
- PLS Group (Overweight) – outperformed, supported by higher lithium prices and what we view as a solid operational update
Negatives
- A2 Milk (Overweight) – underperformed following temporary supply disruption issues in China
- IDP Education (Overweight) – underperformed, amid concerns around lingering topline weakness
- Goodman Group (Underweight) – outperformed, potentially linked to strong data centre capex trends globally
Market Review
The MSCI World Total Return Index rebounded 10.2% (USD) in April with markets reacting to the Middle Eastern ceasefire and strong US earnings that also drove the US S&P 500 up 10.5% (USD). The unemployment rate fell 0.1 percentage points to 4.3%, and the US economy added 178,000 jobs in the most recent nonfarm payrolls report, based on March data, well above the Dow Jones estimate of 59,000. The Federal Reserve held rates steady at 3.50–3.75% at its April FOMC meeting.
The ASX 200 Total Return Index rose only 2.2% lacking the strong earnings benefit and small technology weighting. Materials rose 4.3% on slightly better commodities pricing, with Spodumene lifting 16.7% (USD) on supply cuts and restocking, while Aluminium, Gold and Iron Ore were all flat. Information Technology bounced 13.25% on improving offshore sector sentiment.
Healthcare was the worst performing ASX 200 sector, falling 8.7%, with Cochlear warning on weak demand and margins. Within Consumer Staples, which dropped 4.1%, Woolworths warned on rising fuel costs and supplier cost pressure, and several smaller stocks also flagged weaker consumer sentiment. Energy eased 2.7% as Brent oil backed off 3.7% (USD) and JKM LNG fell 16.0% (USD) amid news of the ceasefire.
Outlook
The US earnings season is nearing completion, and the strength and breadth of EPS revisions is in our view surprisingly firmly to the upside. 2026 consensus earnings have been revised higher to with the ‘Magnificent 7’ expected to grow for the S&P4932, with the divergence mostly attributed to AI spend.
Whilst hyperscaler and semiconductor earnings have been major contributors to this resiliency, the breadth of upward revisions has also been driven by Financials, Industrials and Consumer cyclicals. Specifically, 1Q EPS surprise for the median S&P 500 stock is 6%, the strongest it has been in 4 years, and S&P 500 median stock earnings growth is 16%.
Big tech continues to lift AI investment plans. As referenced in recent research, prior to the reporting season the sell-side expected As of early May they expect $735 billion and $905 billion, respectively. Spending by unlisted companies such as OpenAI and Anthropic are additional, with flow on impacts on “picks and shovels” of the AI supply chain.
On the other hand, we are cautious on the outlook for the Australian economy given the combined impact of tightening policy conditions and sharper price and volume impact from the ongoing global fuel supply shock. We are assessing the speed and depth of a domestic slowdown, which is thus far materialising in modest home price declines in Sydney and Melbourne and softer home sales data in April as per updates from Mirvac and Stockland.
Select consumer facing companies such as JB Hifi, Supercheap and Flight Centre have also flagged softer sales as a result of a lower consumer sentiment. With the trimmed mean inflation (stripping out volatile items like fuel) in Australia stubbornly high at 3.3% in March 2026, the RBA likely has little choice but to stay hawkish to tame inflation expectations. The FY27 Federal Budget could further act as a hand brake on the economy with some slowing in spending growth (from elevated levels) and potential for tax increases (capital gains, negative gearing).
Portfolio Positioning
The outlook for equity markets could be volatile but directionally we are slightly optimistic. Although the ceasefire is fragile, we conclude that we are past ‘peak war fear’, on the basis that we expect neither side is willing to continue to take further war pain. There has seemingly been signs of intent from both sides to de-escalate and reopen the Strait of Hormuz.
We have modestly reduced the defensiveness of the portfolio in anticipation that the fuel-induced inflation and growth impact emanating from the Middle East conflict would be temporary. We have also rotated exposure away from domestic cyclicals towards select offshore earners where growth is likely to rebound sooner. During April, Telstra, Newmont and IAG have been modestly reduced. Positions in Macquarie, NAB and Aristocrat were added.
The Fund’s active positioning by sector as of 30 April is as follows.
For further details on fund positioning please refer to the Paradice Australian Equities Quarterly Fact Sheet.
For any other questions in relation to the Fund, please contact distribution@paradice.com.
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1All indices are Total Return Indices unless otherwise stated.
2S&P 493 represents the S&P 500 constituents excluding the Magnificent 7.
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Contributors:
Julia Weng