January, 2026
Monthly Commentary
Paradice Australian Equities Team
Paradice Australian Equities Fund January 2026 Commentary
The portfolio returned 1.17%, and underperformed the ASX200 by 61bps over the month net of fees.
Key Contributors/Detractors
Positives
- Commonwealth Bank (Underweight) – underperformed on market rotation from banks to Resources
- BHP (Overweight) – outperformed on higher iron and copper prices
- Newmont (Overweight) – outperformed on higher gold prices
Negatives
- Xero (Overweight) – underperformed on risk off sentiment across the technology sector.
- Seek (Overweight) – underperformed on risk off sentiment across the technology sector.
- Corporate Travel Group Overweight) – The Fund undertook a further -50% valuation in January 2026, taking total valuation to -75%. The revaluation was undertaken with consideration to precedents for accounting discrepancies, peer performance since the suspension from quotation, potential reputational impact resulting in loss of customers, and possibility of a capital raise. Further revaluation may be appropriate as more information becomes available.
Market Review
The US S&P 500 Total Return Index rose 1.5% (in USD) in January. The US Fed held rates as robust growth continued, and the labour market improved. Non-farm payrolls increased ~50,000 in December. US core inflation was an acceptable 2.6% in January yoy. Kevin Warsh’s nomination for the Fed chair was viewed as a hawkish surprise, driving up bond yields slightly. US 2-yr Treasury yields rose 5bps and 10 yr yields 7bps. Energy (+10.6%), Materials (+9.5%) and Consumer Staples (+1.6%) led the gains in the S&P/ASX 200, whilst Financials (-1.4%) and Technology (-9.4%) were key laggards.
Materials rose 9.5% and Energy 10.6% on commodity price strength, with Gold rising 13.3% on central bank demand, lithium carbonate 28.8% on ongoing energy storage (ESS) demand and Brent oil 16.2% on geopolitical concerns (all in USD). IT stocks followed US peers lower, dropping 9.4%. After the December monthly CPI came out at a hot 3.8% yoy, the market moved to price a 25bp RBA cash rate hike that ultimately came to fruition in early February. In equities, this drove underperformance of interest rate sensitive sectors like AREITS, which eased 2.7%. Reflecting interest rate differentials, the AUD rose 4.4% vs the USD.
Rio Tinto and Glencore announced discussions about a possible combination. BlueScope Steel received a proposal from SGH and US based Steel Dynamics. Northern Star provided a weaker quarterly report and FY26 guidance downgrade. Woodside announced the CEO’s departure and downgraded FY26 guidance.
Outlook
We remain moderately cautious in the short term given high starting point of equity valuations, geopolitical tension, and a muted US consumer backdrop.
Portfolio Positioning
We have reduced our Materials positioning in the wake of a significant commodities rally. Whilst we remain constructive on medium term dynamics especially for gold, aluminium and rare earths, both the underlying commodities and stocks are likely due a period of consolidation in our view.
As is in other parts of the world, there has been significant dislocation amongst Software-as-a-Service (SaaS) stocks on the back of AI disintermediation concerns. This presents some attractive opportunities for select business models over time, in our view.
We have been mindful of a steadily rising AUD on the back of interest rate differentials and have been trimming stocks with significant offshore exposure. To that extent we have increased exposure to strong domestic franchises with solid execution.
Top 5 active positions (Overweight)
- BHP
- Macquarie Group
- Coles
- Seek
- Insurance Australia Group
For any other questions in relation to the portfolio, please contact distribution@paradice.com.
For further details on fund positioning please refer to the Paradice Australian Equities Quarterly Fact Sheet.
Disclaimer:
This material is prepared by Paradice Investment Management Pty Ltd (ABN 64 090 148 619 AFSL No 224158) (Paradice, we or us) to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information.
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Equity Trustees Limited (ABN 46 004 031 298, AFSL No. 240975) (Equity Trustees) is the responsible entity of, and issuer of units in, the Paradice Australian Equities Fund (Fund). Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX:EQT).
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Contributors:
Julia Weng