Wall Street ended the week with all three major indices retreating after briefly touching record intraday levels. The S&P 500 gave back 0.38% and the Dow shed over 300 points as profit-taking emerged across some of the market's recent high-flyers, including Amazon and key semiconductor names such as Broadcom and Micron.

The Nasdaq held up relatively better, slipping just 0.13% despite also having set a fresh all-time high during the session. Adding to the uncertainty, oil prices recovered from earlier sharp declines as traders remained focused on the evolving situation between the US and Iran.

Commentary from Industry Leaders

During a presentation in Melbourne organised by Michael Baragwanath (Managing Director of Clime Investment Management) and John Abernethy (Founder and Director of Investment of Clime Investment Management), John shared an outlook on the US economy worth summarising.

Inflation is re-accelerating, and John believes consensus is underestimating it. March 2026 CPI came in at 0.9% for the month and 3.3% year-on-year, the biggest monthly jump since June 2022. This was driven largely by a 21.2% surge in gasoline prices tied to the Iran war. While market consensus (EY, Goldman Sachs) has headline CPI peaking around 3.6% before easing back to 3.0% by year-end, John takes a more aggressive view - he expects US annual inflation to breach 4% and stay there for the remainder of 2026.

His reasoning is that the Iran conflict is a sustained supply shock, hitting crude, refined products, fertiliser and petrochemicals, and that second-round effects (wages, insurance, shipping, services repricing) haven't yet fed through to reported CPI. He draws a direct parallel to 2021-22, when consensus was consistently wrong.

The fiscal picture remains deteriorating. Six months into FY2026, the US deficit had already reached $1.2 trillion, with net interest on federal debt running at approximately $88 billion per month - now exceeding reported defence spending. Any improvement in the deficit-to-GDP ratio (projected ~5.8% vs 6.0% last year) is largely a function of inflation lifting nominal GDP, not genuine fiscal discipline. Tariff revenue gains are being absorbed by tax cuts and a Supreme Court review.

John says stagflation is emerging as a real risk. Unemployment sits at 4.3% and is expected to rise to 4.4% by year-end. Government job losses and tightened immigration enforcement are distorting labour statistics. John concludes that the US may be entering a mild stagflationary period - low growth combined with sticky, elevated inflation for at least six months of calendar 2026.

Debt levels are approaching historic danger zones. Public debt is now around 101% of GDP, on track to surpass the post-WWII peak of 106% by 2027. The US has managed this only because the USD remains the world's dominant settlement currency, used in roughly half of all global trade. John flagged that any credible challenge to USD reserve status (BRICS, digital currencies) or continued USD weakness would seriously strain foreign demand for US Treasuries - a risk he says needs to be monitored closely.

Economic News

The RBA has raised the cash rate by 25 basis points to 4.35%, with Governor Michele Bullock warning that additional government spending risks prolonging the inflation fight. The central bank expects underlying inflation to peak at 3.8% in the June quarter, though it could stay above the midpoint of the 2-3% target band for two years if oil prices remain elevated. Government spending has hit a near-40-year high as a share of the economy (outside of COVID), and despite the RBA's caution, state governments continue to announce cost-of-living relief packages, with the federal budget set to follow suit.

The domestic food and grocery supply chain is under significant strain. Container freight costs are up 22% year-on-year, wheat prices are up 8% and soybean oil has surged 52%, while urea fertiliser prices are around 26% higher since the Strait of Hormuz was effectively closed. The Australian Food and Grocery Council has warned that suppliers and manufacturers can no longer absorb these cost increases alone, with every link in the supply chain, from farm inputs to road freight, now more expensive. The RBA has flagged grocery prices, fruit and vegetables and travel as the sectors most exposed to the fuel price shock, though it notes that elevated energy export prices should provide some uplift to government tax revenues.

This environment reinforces the case for holding assets with genuine pricing power and inflation pass-through. Infrastructure assets - toll roads, utilities, and energy networks - have historically performed well in sustained inflationary periods, as their revenues are often contractually linked to CPI. Likewise, exposure to Australian energy and resources producers stands to benefit from elevated commodity export prices and stronger government revenues flowing through the economy. Conversely, consumer-facing businesses with thin margins and limited ability to pass on costs, particularly in food retail and discretionary spending, warrant closer scrutiny. With the RBA now in a tightening cycle and fiscal policy pulling in the opposite direction, the outlook is one where asset selection and sector positioning matter more than ever.

Market Snapshot

• Australia: ASX falls as US-Iran tensions ignite

• United States: Dow -0.6%, S&P 500 -0.4%, Nasdaq -0.1%

• Bonds: US 10-year yield at 4.39%, Australian 10-year yield at 4.92%

• Gold: Declined overnight

Key Events Coming Up

• Friday 8 May: US Nonfarm Payrolls

• Tuesday 12 May: US YoY CPI (Apr)

• Thursday 14 May: US Initial Jobless Claims

Investment Update

Important Information - This opportunity is subject to due diligence. The following is provided for the purpose of gauging client interest only. Wholesale and sophisticated investors only.

We are currently reviewing an unlisted industrial property fund offering exposure to a fully developed, 100% leased core industrial portfolio located in Western Australia.

The portfolio comprises six modern assets spanning approximately 76,900 sqm of gross lettable area across strategically positioned industrial precincts in the Perth metro region, one of Australia's most supply-constrained industrial markets.

The fund is currently undertaking a recapitalisation, offering incoming investors the opportunity to acquire units at NAV in an already stabilised, income-generating portfolio, bypassing the development and lease-up risk typically associated with unlisted property funds at inception.

Highlights

• Portfolio Valuation: $183.5 million

• Leasing Status: 100% leased

• Weighted average lease expiry: ~9 years (by income)

• Target income: 7.0% p.a. (over 5 years)

• Target IRR (net of fees): 13.0%+

• Equity Multiple: 1.79x

• Investment Term: 5 years

• LVR: 47%

What Makes This Compelling

Stabilised, institutional-grade portfolio. The assets have been purpose-built and fully leased since inception, providing investors with immediate, day-one income from a portfolio that has already cleared development and leasing risk.

Exceptional tenant quality. The portfolio is anchored by a diversified mix of established Australian and global operators across resources, agriculture, infrastructure and advanced manufacturing. Tenants include ASX-listed companies, subsidiaries of major global corporations and government-backed operators, providing strong covenant strength across the lease book.

Long leases with embedded rent growth. With a ~9 year WALE and rent review structures including fixed increases of 3-3.5% and CPI-linked escalations, the income profile is highly predictable. Critically, a number of existing leases are currently below prevailing market rents, providing meaningful upside through rental reversions as market reviews are triggered over the investment term.

Perth industrial fundamentals are exceptional. Perth currently has the lowest industrial vacancy rate in Australia at 1.6%. Structural demand drivers including the AUKUS naval shipbuilding investment ($12 billion committed to Henderson/Rockingham), critical minerals infrastructure and defence-related logistics are expected to sustain tenant demand well beyond the fund's investment horizon. Supply constraints on the eastern seaboard mean Perth continues to attract disproportionate institutional interest.

Next Steps

If this opportunity interests you, please get in touch with us today and we can provide you with more information.