18 months ago Steen Jakobsen explained why his preferred trade for the Australian market was overweight resources and underweight financials. We recently asked him for an update to see how his view has evolved. He maintains this position and says that Bank earnings have peaked, and they are over-represented as a proportion of the Australian economy & market. “The Banks are important for facilitating credit, but they can’t be 27% of the index… Most importantly, I think the ability to extract earnings from leveraging credit is very difficult. Australia is at the peak in terms of private lending and corporate lending. So I think there is really no earnings potential.” Jakobsen says that while the earnings cycle for the banks has peaked, he believes the outlook for the resources sector is quite positive. Watch this short video for his full explanation:


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