The improvement in the global economy is being offset by the persistently high $A, and the need to reduce government spending to return the country to fiscal...

The improvement in the global economy is being offset by the persistently high $A, and the need to reduce government spending to return the country to fiscal stability. Therefore, Australian-facing equities are likely to continue to struggle to grow earnings, with some exceptions such as the residential housing, financial services, and potentially healthcare sectors. In this climate we continue to avoid excessively priced defensives (which will be very exposed to rising long-term bond rates), and cheap mining services stocks that carry near-term earnings risk. Whilst we have some exposure to Consumer Discretionary, it is limited to quality long-term names such as Flight Centre and G8. We are overweight Materials, but this is mainly domestically exposed names such as Dulux, Boral and global ag-chem exposed Nufarm. Our Financials overweight is mainly in global fund managers (Henderson, Platinum Asset Management) and defensive domestic names such as Austbrokers and Equity Trustees. (VIEW LINK)