Macquarie turns bullish on Australian stocks; boosts tech and cyclicals

Macquarie analysts have adopted a more constructive stance on Australian equities, citing global easing and strong cyclical momentum, drawing parallels to the 1998-99 market. They have upgraded exposure to tech and AI-related stocks such as Nextdc and Seek, while reducing bond proxies, anticipating earnings upgrades in fiscal 2026 from improved business conditions and consumer spending. Despite elevated S&P/ASX 300 forward PEs, Macquarie projects further upside if macro momentum holds, though they caution that global easing may soon peak.

Analysis

Macquarie analysts have adopted a more constructive, bullish stance on Australian equities, citing a combination of global monetary easing and strong cyclical momentum. They draw a direct parallel to the 1998-99 market environment, which was characterized by a liquidity and technology-driven boom. To capitalize on this, the firm is strategically rotating its portfolio by increasing exposure to technology and AI-related stocks like Nextdc Ltd (ASX:NXT) and Seek (ASX:SEK), alongside select small-caps such as Lovisa Holdings (ASX:LOV). Concurrently, Macquarie is reducing positions in bond proxies, specifically naming GPT Group (ASX:GPT) and Transurban Group (ASX:TCL), which are less favorable in a pro-growth environment. This thesis is supported by their proprietary "Macro Velocity" indicator, which they claim justifies the current elevated forward P/E on the S&P/ASX 300. While the firm forecasts earnings upgrades for fiscal 2026 based on improving business and consumer conditions, it also cautions that the peak of the global easing cycle may be approaching, representing a key risk to the outlook.

Key Decisions for Investors

• Consider increasing portfolio allocation towards Australian technology, AI, and cyclical growth stocks to align with the analyst-identified momentum.
• Review and potentially reduce exposure to interest-rate-sensitive bond proxy stocks, such as GPT Group, which are being de-emphasized in this market outlook.
• Monitor global central bank policy shifts and macroeconomic data closely, as the sustainability of the bullish thesis is highly dependent on continued easing and economic strength.
• Evaluate select small-cap opportunities, like Webjet and Lovisa Holdings, which have been flagged as potential beneficiaries of stronger consumer spending.