Is the bad news for retailers “already priced in”?

It has been a tough few months for retailers, with increasing rates and growing cost of living pressures dragging on the price for much of the consumer discretionary sector.

However, Naomi Bant, Portfolio Manager on the Australian Sustainable Equity Strategy at ClearBridge Investments, believes the recent rally means much of the bad news is “already priced into high-quality consumer franchises”.

This includes names like Woolworths, Coles and Wesfarmers, but she has taken a particular interest in JB Hi-Fi Group (ASX: JBH).

In this Q&A, Bant explains the case for putting the consumer electronics retailer on her watchlist, why ClearBridge has trimmed its position in Macquarie Group (ASX: MQG), and shares why new investors need to build a disciplined process.

What’s your most recent investment and why?

In the Sustainable Equity strategy, we recently added to our position in Suncorp Group (ASX: SUN), one of Australia and New Zealand’s leading general insurers.

The company has a strong franchise in a high return, concentrated industry where structural threats remain relatively limited. 

We see resilient earnings power despite inflation and cost of living pressures, supported by adequate capital, improving operational discipline, and fewer red flags under the current CEO’s back-to-basics strategy.

Suncorp also has a credible sustainability profile, with a proactive focus on community resilience and climate risk management.

Which investment did you add to your watchlist this week?

JB Hi-Fi is the leading consumer electronics and home appliances retailer across Australia and New Zealand, operating through JB Hi-Fi, The Good Guys, and online channels.

The share price has pulled back from its elevated levels following the three rate hikes and rising concerns around household spending pressure.

While downside risk to earnings still keeps us cautious for now, the quality of the franchise means it remains on our radar for potential future investment.

What is the most recent investment you have trimmed or sold and what drove this decision?

We trimmed Macquarie Group after strong share price performance, consistent with our disciplined approach to reducing positions as they approach fair value.

The rally has been supported by a reacceleration in earnings after two softer years, with all four divisions growing. In particular, the CGM (Commodities and Global Markets) division is benefiting from the OnStream sale, stronger oil, gas and power hedging, and higher trading income. 

The re-rating was further reinforced by the Nomura transaction, stronger MAM (Macquarie Asset Management) division performance fees, Macquarie Capital division private credit and realisation income, and analyst target price upgrades following the result.

We continue to value Macquarie’s Sustainability Pathway, which demonstrates strong ESG integration across its investment and corporate lending activities. Its green energy exposure includes development capital, allowing it to directly support the transition from fossil fuels to renewables through green bonds, the Green Investment Bank, and project co-investment.

What’s your favourite chart or data point from this week?

My favourite chart this week is the ANZ-Roy Morgan Australian Consumer Confidence Index. The latest reading has improved modestly to 70.8, but it remains deeply below the neutral 100 level and well below its long run average.

In other words, consumers are still telling us they feel under material pressure, even as equity markets have been broadly flat over the week. 

The chart matters because it captures a key tension in the Australian outlook. Consumers remain pessimistic, but markets appear to be pricing resilience rather than capitulation.

What was your weekly high – a standout market moment or highlight?

The highlight last week was the strength in retailers, particularly Woolworths (ASX: WOW), Coles (ASX: COL), Wesfarmers (ASX: WES) and JB Hi-Fi. After a period of concern around rates and household budgets, the rally suggested investors are reassessing how much bad news is already priced into high-quality consumer franchises.

What was your weekly low – a market disappointment or challenge from the week?

My weekly low is the growing disconnect between macro risks and market pricing. I am increasingly concerned that the probability of an economic slowdown is rising, but that markets are not fully reflecting that risk.

The macro data are not sending an especially reassuring signal. Inflation remains too high, consumer sentiment is still deeply pessimistic, and Westpac’s Consumer Update last week highlighted a slowing credit impulse, with total housing credit growth expected to fall from 6.5% in FY26 to 4.7% in FY27, before recovering to 5.2% in FY28.

For Australia, that is important. Housing credit growth is a key barometer of household confidence, bank revenue momentum and the broader domestic cycle. A slower credit environment usually points to more pressure on consumption and a tougher earnings backdrop for domestic cyclicals.

Markets, however, seem to be looking through these risks and assuming a soft landing. That is possible but not guaranteed. The challenge is that if inflation stays sticky while growth slows, policymakers have less room to respond, and equity markets may be under-pricing the downside risk.

What first drew you to markets or this sector and what continues to keep you inspired today?

Every day you come to work and the markets are changing. You're constantly learning, adapting and improving, which is what first drew me to investing and what continues to keep me engaged today.

What’s one piece of advice you’d give to new investors?

One piece of advice I would give new investors is to focus less on predicting markets and more on building a disciplined process. Understand what you own, why you own it, what could go wrong, and what would make you change your mind. We call this thesis breaks. 

Markets will always be uncertain, but a clear process helps you make better decisions when conditions become uncomfortable.

How do you unwind when you’re not thinking about the market?

I enjoy hiking – the peacefulness, quiet time, letting my mind wander and relax and enjoy the sites. No screens or distractions.

The pink jacketed one in the image is me hiking towards Trolltunga in Norway (20-27km round trip in a day).

What is your favourite investing book? 

One Up on Wall Street (by John Rothchild and Peter Lynch).

What is your favourite investing or finance/markets related podcast? 

JP Morgan’s “Making Sense” podcast.

What’s the first thing you read each morning? 

The AFR.

What is your favourite restaurant? 

Tonka.

What’s something people are surprised to learn about you? 

I am good at archery.

Think there’s a better pick? Prove it. Share your rapid-fire book, podcast, and daily read in the comments.

Managed Fund

ClearBridge Sustainable Equity Fund

Australian Shares

View