The biggest wealth destroyers on the ASX this year (and how to avoid them)

With US markets at all-time highs and the ASX around 5% from its record mark, one might be forgiven for thinking that all is well in the land of equities. But this belies what’s going on beneath the surface and could be the calm before the storm – particularly in Australia. 

The table above, put together by ETF provider Global X, highlights the top 10 ASX ‘wealth destroyers’ (their term) in 2026. What stands out is the quality of names on the list – these are some of the most widely held names on the ASX, likely to be in many readers’ portfolios.

Confession season 

This week, Macquarie will host its Australia Conference, an event that is considered the unofficial start of ‘confession season’.

For those who are unfamiliar, confession season refers to the period - typically a few months before reporting seasons (February and August) - when listed companies are forced to come clean on earnings that are going to miss market expectations.

The rule that forces the “confession”

Under the ASX Listing Rules - specifically Listing Rule 3.1 - a company must immediately disclose any information that a reasonable person would expect to have a material effect on the price or value of its securities.

In practice, that means:

• If management knows earnings will miss consensus or prior guidance
• And that information is not already in the market
• Then they are legally required to disclose it

This is reinforced by the Australian Securities and Investments Commission, which enforces continuous disclosure obligations and can pursue breaches.

What’s this season likely to be like?

If there was ever a set-up for a volatile confession season, this is it.

The backdrop is already one of rising volatility. Ten Cap’s Jun Bei Liu recently noted that while index-level volatility has stayed contained, “at the stock level, it is getting bigger and bigger,” with more frequent extreme moves.

This season will bring those pressures into the open. The Iran war is set to flow through to higher costs, softer demand, and margin pressure. Layer on higher interest rates, which continue to bite leveraged balance sheets, and the growing disruption from AI, particularly across tech, and the risk profile starts to build.

There are early signs of caution. Several ASX companies have reportedly pulled out of this year's Mac Conference, including CSL, Reliance Worldwide and Maas Group, while Temple & Webster and Lendlease are also rumoured to be stepping back.

The reasons are never explicit, but the pattern is telling. Many have faced downgrades, operational challenges, or leadership changes.

More broadly, fund managers are bracing. Both on and off the record, the message is consistent: this could be a tough season. Oscar Oberg, Wilson Asset Management’s small-cap portfolio manager, who spoke candidly at a recent event, shared his baseline for the upcoming season;

“My assumption is every company is going to downgrade in the next month or two.”

What to do if you’re holding a stock that downgrades?

The first thing to recognise if you’re holding a stock that gets downgraded is that there’s a good chance it’s not one and done.

In an interview I did with Stuart Welch from Alphinity last year, he shared that research the firm had conducted showed that positive earnings revisions are often serially correlated.

“By that, what we mean is that having one earnings upgrade increases the probability that you're going to have a second, third and a fourth”, said Welch at the time.

Whilst that research concerned earnings upgrades, the same is true in reverse. Companies that are struggling often experience multiple downgrades before they turn things around – CSL being a high-profile case in point recently.

The company has been a case study in how downgrades can cluster. The first reset came at its October 2025 AGM, where management trimmed FY26 growth expectations on weaker-than-expected flu vaccine demand. That proved insufficient. By February, half-year results confirmed softer conditions, with profits sharply lower and confidence in the recovery dented, even as guidance was maintained.

The sequence reflects a business grappling with demand volatility and cost pressures, where initial optimism gave way to a more protracted reset in expectations.

Another point to note is that companies that downgrade and endure an immediate negative share price reaction often see lower share prices over the ensuing 12 months.

Whilst the research my colleague Kerry Sun conducted recently focused on stocks missing earnings expectations upon their results release, it was no less telling about the prognosis.

Stocks that miss earnings expectations fall an average 6.3% on results day and continue declining to 8.4% lower four months later, based on 16 reporting seasons from 2008 to 2024

All told, the research shows that if you’re holding a stock that downgrades, at the very least, you should review the position.

A useful framework is to have a trigger point for review. Munro Partners, for example, has shared many times its review framework, which is to discuss at an investment committee level any stock that falls 20% from entry or from its peak.

“A trigger demands a review. The review is a detailed re-pitching of the idea in front of the entire team, and you only get to keep the stock if the entire team agrees with you,” Munro's Qiao Ma explains.

This framework proved particularly valuable last year when many software companies began declining simultaneously. Multiple holdings triggered the review process, forcing the team to revisit the underlying thesis.

Eventually, the conclusion became clear: the rapid progress of large language models posed a genuine risk to many traditional software companies.

“The dots connected for us. These large language models, the rapid advancement of them and how each one is leapfrogging the other one, is going to be a real problem,” Qiao said.

Munro ultimately exited its software exposure entirely, which helped the portfolios avoid much of the subsequent sell-off in the sector.

Your checklist if a company downgrades

• Do not assume it is “one and done”. Downgrades often cluster, so treat the first cut as a warning signal, not a clearing event.
• Separate cyclical from structural. Is this a temporary hit to demand, costs or timing, or evidence the business model is under pressure?
• Rebuild the thesis from scratch. Ask whether you would buy the stock today, knowing what you now know.
• Check balance sheet risk. Downgrades matter more when debt is high, covenants are tight or cash flow is deteriorating.
• Watch management credibility. If guidance was recently reaffirmed and then cut, trust should fall.
• Compare consensus to new guidance. If analysts still look too optimistic, further downgrades may follow.
• Set a trigger. A 15-20% fall, or a second downgrade, should force a full review.
• Be willing to sell. A lower share price is not a reason to hold if the earnings base has changed.

There you have it – a practical guide for navigating what could be one of the more volatile confession/earnings seasons in recent memory. Good luck.