US uncertainty fuels Australia’s ‘safe haven’ status: Ten Cap

Yasmine Raso

Senior Journalist, Financial Newswire

21 July 2025

New market commentary from an Australian boutique equities specialist has dispelled concerns held by the consensus over inflated equity valuations and instead pointed to their ability to weather ongoing downside risks. 

The chief executive and Co-Founder of Ten Cap, Jason Todd, said the fund manager has parted from the consensus in the belief that equity markets are able to withstand the current risks they are facing, including volatile trade and tariff negotiations, ongoing geopolitical tensions, fluctuating commodity prices and “widespread distrust” in the recent rally.

“We took the view that when US President Trump paused the implementation of tariffs on April 9, that was the peak in uncertainty. Since then, we’ve ridden the wave higher without the accompanying fear of doing something wrong,” Todd said.

“We have an optimistic outlook on the macro backdrop and from an equity perspective, whether it is international or domestically, we think the market will be meaningfully higher by year end. If you’re not long, you need to get long, and we think you just stay long until (and if) we see these risks amplify.

“We expect equities to continue climbing a wall of worry through the second half of 2025. Maybe not in a straight line but certainly with an upward bias. Equity markets are showing a high degree of resiliency through their repeated ability to absorb downside risks, and we think this is a solid base for further gains as we move into the second half of the year.”

According to Ten Cap’s Lead Portfolio Manager and fellowCo-Founder, Jun Bei Lui, said a combination of “earnings upside and earnings multiple expansion” are set to fuel a strong performance for the remainder of the year for Australian equities, particularly as the US continues to struggle through uncertainty

“I think investors will be surprised by how resilient the Australian market is to ongoing risks and volatility. We expect mid and small cap companies to have an even better year than some of their large cap counterparts,” she said.

“Domestically, we are very confident that policy rates are coming down. For cyclical areas, whether it be consumer or interest rate sensitive areas, that’s generally a very positive driver. Our portfolio remains overweight key beneficiaries of this, with investments in JB Hi-Fi, REA Group, Seek, and Universal Store, where we see a clear path to earnings upgrades as confidence improves.

“For example, JB Hi-Fi has been that compounder that continues to deliver, despite the patchy retail environment for the last four months. We believe the company will continue to drive growth over the next 12 months, with the expected rate cut from the RBA an added tailwind for the company. Analysts often miscalculate forecasts on operating leverage, whether on the upside or downside, so when earnings are upgraded and revenue numbers starts to improve, the consensus still underestimates how much earnings upgrade will come through.

“We think the earnings environment will begin to bottom out this August reporting season and we’ll start to see some positive leverage. Valuations are not going to be a constraint for upside.”

“The US is kicking own goals and outside of a recession, we think Australia can avoid the worst of these drags. While valuations are elevated, we have repeatedly argued that they are not a constraint to the domestic equity market trading higher, particularly when cyclical tailwinds are building,” Todd said.

Bei Lui also confirmed the firm has participated in several IPOs this year, in their efforts to “back high-quality businesses early” and showcase pockets of opportunity for investors.

“Virgin emerges from restructuring with a leaner cost base, improved margins, and a clear strategic runway. It is also good for Qantas to have some listed competition,” she said.

“GemLife has a proven operating model and clear demographic tailwinds. We see significant potential for scale and margin expansion over time.”