Global equity markets pushed higher overnight, with the Dow Jones Industrial Average reclaiming the 50,000 milestone on the back of earnings results from Cisco Systems and growing optimism around the US-China summit in Beijing.

Cisco was the standout performer, its shares jumping 13% after the networking giant delivered third-quarter earnings and forward guidance that comfortably exceeded analyst expectations. The result was accompanied by an announcement of approximately 4,000 job cuts as the company continues to reshape itself around AI infrastructure. Nvidia also had a strong session, advancing more than 4% following reports that the US government has approved around ten Chinese firms to purchase its H200 chips - a notable development given the broader context of the Trump-Xi meetings currently underway in Beijing.

Commentary from Industry Leaders

Last week we shared John Abernethy's thoughts on the US economic outlook. This week, following a conversation with both John and Michael Baragwanath, we're pleased to bring you their perspectives on the 2026-27 Australian Federal Budget.

John's assessment was direct - he believes the Federal Budget lacks vigour, foresight and a coherent plan. His central concern is that it is driving a wedge between older and younger generations, particularly when it comes to housing affordability.

On property, John's view is unambiguous: for housing to become genuinely affordable for younger Australians, prices need to come down substantially. A 3.5% forecast wage increase, as reflected in the Budget, falls well short of the 20-30% wage growth that would be needed to close the gap. In his view, it simply isn't a functional budget for achieving the outcomes the government is promising. On the corporate and economic outlook, the numbers tell a bad story. Australia's corporate sector is projected to pay approximately $150 billion in tax this financial year, and in four years' time, that figure remains unchanged. No growth in tax collections means no earnings growth, and that is a poor outlook for the broader economy.

John also raised concerns about internal inconsistencies in the Budget's own forecasts. He noted that the government's assumptions around wage growth and inflation don't reconcile with their projected collections from PAYG taxpayers. On tax relief for younger income earners, he was pointed in his criticism, describing the measures as inadequate and predicting the government will look to make further inroads on HECS debt ahead of the next election cycle in an attempt to win back younger voters.

On the residential property and negative gearing front, John identified a structural gap - the missing link in housing supply is bank financing for land development. As a result, construction businesses are increasingly turning to private lending markets to fill the void. He did, however, see some potential in the Budget's flagged intention to deploy Australia's Future Fund, with its $270 billion balance sheet, toward residential construction. John believes greater government equity participation in land developments would be a positive step, though he remains cautious about whether the policy framework as a whole will deliver meaningful results.

Michael commented on construction costs and labour shortages, noting that nothing in the budget addresses them - which means any houses built in regional suburbs won't necessarily be cheaper, and if people end up living further from amenities, it will cost them more anyway in petrol and transport.

John closed with a macro view. Australia is now a $3 trillion economy, but he was quick to note that this growth has been inflation-induced rather than driven by genuine productive expansion. Looking ahead, he believes inflation could re-accelerate toward 6%, setting the conditions for a stagflation cycle: low economic growth, low earnings growth and significant price-to-earnings compression across Australian equities. In short, he expects tough times ahead.

For investors, this shifts the strategic lens considerably. In the current environment, we are looking at more income opportunities for clients. If you'd like further information on the budget or a conversation about your current portfolio, please feel free to reply back.

Economic News

Trump is currently in Beijing for a state visit from 13-15 May, his first trip to China since 2017 and the first visit by a sitting US president in nearly a decade. The high-stakes summit comes at a time of heightened geopolitical and economic uncertainty, with talks centred on trade, Taiwan, artificial intelligence and the ongoing conflict involving Iran. Trump is accompanied by a notable delegation of American business leaders, including Tesla's Elon Musk and Nvidia's Jensen Huang, with analysts anticipating potential announcements around large Chinese purchases of American aircraft and agricultural goods.

The two leaders agreed to develop a framework Beijing has described as a constructive, strategically stable China-US relationship, which Xi indicated would guide relations for the next three years and beyond. On Iran, both sides agreed that the Strait of Hormuz must remain open and that Iran must never obtain a nuclear weapon, with China also expressing interest in purchasing more US oil to reduce its reliance on Middle Eastern supply. Taiwan, however, remains the sharpest point of tension - Xi warned it was the most important issue in US-China relations, cautioning that mishandling it risked collision or conflict between the two powers. For markets, the summit's tone has been broadly constructive, and any progress on trade and tariffs will be watched closely for its implications for global growth and risk sentiment.

Market Snapshot

• Australia: ASX rises as traders buy into banks and tech stocks

• United States: Dow 0.8%, S&P 500 0.8%, Nasdaq 0.9%

• Bonds: US 10-year yield at 4.48%, Australian 10-year yield at 5.01%

• Gold: Declined overnight

Key Events Coming Up

• Thursday 21 May: US Initial Jobless Claims

Investment Update

Following the release of the Federal Budget 2026-27, we invite you to join River X & Clime for a timely discussion on the key measures and their implications for investors, business owners and portfolios. This webinar will occur on Monday 18 May, at 12:30pm.

Kieran Berry (CEO of RiverX) and Michael Baragwanath (CEO of Clime Investment Management) will unpack the economic backdrop alongside key policy changes across tax, property and investment structures. With reforms to capital gains tax, negative gearing and discretionary trusts, the landscape is shifting and requires careful planning.

In this webinar, Kieran and Michael will cover:

• The economic outlook and fiscal direction

• Key personal and business tax changes

• Reforms to CGT, negative gearing, and trust structures

• Implications for property and key sectors

• Practical actions and key dates to consider

This session will provide clear, practical insights to help navigate the risks and opportunities ahead.

Please use the link below to register.

River X / Clime | Unpacking the Federal Budget 2026-27 | Join Meeting in Teams | Microsoft Teams

If you have any questions, please get in touch with us today.