“Killing season” - why reporting season won’t forgive disappointment

After a volatile 2025 and an already noisy start to 2026, the easy money in markets is gone. What’s replaced it, according to Henry Jennings of Marcus Today, is a far more unforgiving environment where expectations matter more than narratives, and where investors need to be sharper, faster and more selective than they’ve been in years.

In our catch-up, Jennings was blunt about the risks facing Australian investors heading into reporting season. Corporate Australia, he argues, is operating in a market that has little tolerance for disappointment, particularly after a period of elevated optimism.

Strong results will still be rewarded, but anything less than perfection risks savage share price reactions. For Jennings, volatility is not a sign to retreat, but a test of how well investors know their companies.

That mindset also extends to portfolio construction. After strong gains in resources and small caps, Jennings has been taking profits, lifting cash and positioning for what he expects will be a harder year for equities overall.

In a world where policy, politics and sentiment are all in flux, he believes discipline matters more than conviction.

Reporting season will be ruthless

Jennings expects the upcoming reporting season to be defined less by absolute earnings outcomes and more by how those results stack up against market expectations. The last reporting period, he says, was “massively volatile”, and he sees little reason for that to change.

“Good results will be rewarded and bad results will be punished,” he said. “We saw that last season. It was a killing season.”

The problem, Jennings argues, is not that corporate Australia is broadly weak, but that expectations have become “wildly optimistic”. When companies fail to clear that bar, the market response can be brutal.

“If expectations are not matched or beaten, you are getting smashed,” Jennings said. “Hedge funds take no prisoners.”

Jennings’ takeaway is not to retreat from volatility, but to understand holdings well enough to live with it. He sees the current environment quickly punishing anyone who does not truly know what they own.

“Investors need to live with the volatility.”

Rates, policy and a tougher domestic backdrop

The Reserve Bank of Australia’s 25 basis point rate hike has reinforced Jennings’ view that domestic conditions will remain a headwind through 2026, even if the move itself was broadly anticipated.

Higher rates, he argues, will continue to pressure households and weigh on consumer-facing sectors. “There’s more pressure on households and retail,” he said, warning that tighter financial conditions are likely to slow activity across the sector.

Banks may see mixed effects, but overall Jennings expects higher rates to slow parts of the economy. At the same time, relatively higher Australian rates could support the currency, complicating the outlook for exporters.

In Jennings’ view, the prospect of Australian rates diverging from global peers would add to headwinds for exporters, while offering some relief for importers.

More broadly, he expects diversification away from US markets to continue, with rate divergence and policy uncertainty shaping those flows.

Taking profits after a strong run

After strong performance over the past year, Jennings has been actively reducing risk in his own portfolio. His small-cap portfolio, heavily exposed to resources, is up around 49% year-on-year and includes a high level of cash.

“Resources are cyclical. They do come and go,” he said. “So I’ve been taking a little bit of profit and reducing exposure.”

That has included trimming uranium exposure, as well as taking profits in stocks that experienced sharp, speculative rallies. Jennings pointed to 4DMedical (ASX: 4DX) as an example, describing it as a “blow-off move” after the stock surged from around 40 cents to nearly $5.

Rather than chasing momentum, Jennings sees these episodes as opportunities to lock in gains, particularly in cyclical sectors.

Where he’s still finding opportunity

Despite the caution, Jennings is not bearish across the board. He says volatility can still create opportunity, particularly around reporting season when share price reactions can diverge sharply from underlying results.

He says he is looking to take advantage of short-term volatility, especially when companies deliver clean results and demonstrate genuine growth.

Among the names on his radar is Pengana Private Credit Trust (ASX: PE1). He has also recently added Regal Partners (ASX: RPL), which he says is “doing all the things right”, with exposure to resources and small caps.

In resources, Jennings remains constructive on gold. He points to St Barbara (ASX: SBM) and Vault Minerals (ASX: VAU), having taken some great profits in Genesis Minerals (ASX: GMD) and Bellevue Gold (ASX: BGL) recently. 

At the same time, he remains cautious on parts of the technology sector.

“The tech sector has been decimated,” Jennings said. “And I think there’s more carnage to come.”

He says the emphasis is on businesses that deliver, not those relying on narrative.

“I’m reacting to results,” he said. “Trying to buy companies that produce good results and show good growth.”

A harder year ahead, and a warning on crypto

Looking beyond reporting season, Jennings expects 2026 to be more challenging for equities overall.

“The easy money has been made,” he said. “Returns have been abnormal, and this will be a harder year.”

US policy remains a key swing factor, particularly around interest rates and Federal Reserve leadership, but one of his strongest views is reserved for crypto.

Jennings is openly sceptical about the asset class’s future.

“I see the demise of crypto,” he said. “It’s energy consuming, hard to transact with and inextricably tied to Trump.”

That view stands in contrast to resilient tech stocks and growing interest in alternative online markets. Interestingly, Jennings sees prediction markets as a potential growth area in 2026, from sports and elections to broader online hedging.

What emerges from Jennings’ outlook is a market where volatility persists, discipline counts, and realism matters more than belief.