US equity markets finished the week strongly, with the S&P 500 closing just above 7,041, the Nasdaq near 24,103 and the Dow adding around 115 points to finish close to 48,579. The Nasdaq was the standout, recording its twelfth straight positive session, its longest winning streak in over fifteen years.

Commentary from Industry Leaders

Global investment consultancy Mercer has released its Q2 2026 Economic and Dynamic Asset Allocation Outlook, and the key message is clear: the environment has shifted materially, but pockets of opportunity remain for investors who know where to look.

The Middle East conflict has delivered what Mercer describes as a stagflationary shock to the global economy, pushing energy prices higher while simultaneously constraining growth. For Australia specifically, the report notes we are expected to grow below our economic potential this year, placing us alongside the UK and Canada as underperformers relative to global peers.

On interest rates, Mercer's view is that the broad phase of monetary easing is effectively behind us. Central banks are either on hold or tilting toward further tightening, and the report notes that the RBA is likely to remain cautious given how close rates already are to previous cycle peaks.

What does this mean for different asset classes? Equities are held at a neutral view - corporate earnings remain solid but valuations are still elevated by historical standards and geopolitical risk creates near-term uncertainty. In private credit, Mercer favours strategies that benefit from complexity and specialised lending over straightforward direct lending, where spreads remain tight. Infrastructure, particularly digital and logistics themes, remains a favoured area given its support from long-term structural trends. In private equity, deal activity is picking up in small and mid-market buyouts, and the challenging fundraising environment is creating strong co-investment opportunities for those with capital ready to deploy.

The overall message aligns with what we've been communicating to our clients - diversification across quality assets, with a focus on income generation and inflation resilience, remains the most prudent foundation in this environment.

Economic News

Australia's federal government debt is on track to cross the $1 trillion mark within months. The IMF released a new fiscal policy report this week warning that government debt globally is now on course to reach 100% of world GDP by 2029, a full year earlier than previously forecast, and its criticism of governments was blunt: years of solid post-pandemic growth were available to repair national finances and most countries chose not to.

Australia's interest payments on government debt are expected to be the fastest-growing area of federal spending over the next decade. That's money going to creditors rather than to productive economic activity.

Government bonds are becoming a more interesting conversation again after years of being overlooked. With yields rising alongside rate expectations, there's now actually income to be earned. The caveat is duration risk - longer-dated bonds remain sensitive to further rate moves, so shorter-duration fixed income is where the more defensive positioning sits right now.

Market Snapshot

• Australia: ASX lower as investors wait for ceasefire update

• United States: Dow 0.24%, S&P 500 0.26%, Nasdaq 0.36%

• Bonds: US 10-year yield at 4.31%, Australian 10-year yield at 4.95%

• Gold: Flat overnight

Key Events Coming Up

• Thursday 23 April: US Initial Jobless Claims - measures the number of people who filed for unemployment insurance for the first time during the past week

Investment Update

Private Equity Update - Australian Manufacturing Venture

One of our private equity holdings continues to make strong progress this quarter, with a major industrial facility moving firmly toward its commissioning phase.

The facility, which will process and refine a high-value Australian commodity for export, has received the majority of its purpose-built equipment - over 150 containers worth - with assembly now well underway. A specialist engineering team is on site working alongside Australian tradespeople to install and commission the processing equipment, and the project remains on track for its targeted commissioning date later this year.

Infrastructure works to meet Australian health and safety standards are also progressing, including drainage systems and the construction of specialised fire-rated rooms. Temporary power and wastewater solutions have been put in place to ensure these works don't delay the broader build schedule - a prudent approach that avoids overcommitting capital before actual operational requirements are confirmed.

The venture has approximately $1.5 million of raw product already in storage, ready to be processed and shipped upon commissioning - a positive sign that the commercial pipeline is being built in parallel with the physical infrastructure.

What this means for investors: this is exactly the type of patient, asset-backed private equity opportunity that takes time to mature but carries tangible underlying value. As the facility moves from construction into production, the focus shifts from capital deployment to revenue generation - a significant milestone for shareholders.

Next Steps

Allocation into this opportunity remains open for those looking to add private equity exposure to their portfolio. If you'd like to learn more, simply reply to this email and we'll be in touch.

Important Information - Wholesale Clients Only

Past performance is not a reliable indicator of future performance. Any forward-looking statements, target returns, or yield estimates are indicative only, based on assumptions and current expectations and are subject to risks, uncertainties and change. Actual outcomes may differ materially. No representation or warranty is made as to the accuracy or completeness of the information contained in this communication.