While geopolitical events in the Middle East will shape investor sentiment in the weeks and months ahead, it is worth assessing the underlying themes from the earnings season that has just closed. Equity markets remain at, or close to, all-time highs, but that headline obscures a more complicated reality. The story is one of extremes: banks and miners on one side, and technology stocks on the other.

Upward momentum in earnings revisions for the ASX 200 has been the strongest since mid-2022. After three years of post-COVID downgrades, close to two out of every three companies have beaten profit expectations while talking optimistically about the outlook. On the surface, that looks like an environment that should support confident, straightforward investor messaging. Scratch the surface, however, and a very different picture emerges.

Two sectors holding up the market

Banks and miners are the barbells propping up the Australian equity market, together comprising around 60% of the index.

Miners are benefiting from surging commodity prices in gold, iron ore and copper, which has translated into strong earnings and rising share prices. That theme will likely continue given events in the Middle East, along with the inevitable rise in oil and the energy complex in general.

After several years of underperformance, investors’ long patience with mining stocks is finally being rewarded. Many believed last year would be the high-water mark for the banks, yet this results season has delivered stronger than expected earnings and trading updates. Potential for increased dividends only adds to the robust share price performance in the financial sector. Many active managers have been caught short by the sector’s strength.

Retail-exposed stocks have been more mixed, with discretionary names expected to come under pressure as higher interest rates weigh on household spending and the prospect of another rate rise before June remains live.

‘SaaS-mageddon’ and the ‘AI-pocalypse’ – a crisis of valuation

While financials and mining are holding up the index, the real story of this reporting season is the sharp correction in software and technology stocks, earning the moniker of ‘SaaS-mageddon’ or the ‘AI-pocalypse’. Many Australian software-as-a-service names have experienced sharp corrections in recent weeks. The market’s reassessment of growth, profitability and competitive advantage in the face of AI disruption has been brutal.

Valuation uncertainty is endemic. Public markets are grappling with how to value businesses whose economics and business models will be reshaped by AI. Private equity, which has made significant returns over the past two decades from tech assets, is facing similar questions behind closed doors.

Every company claims it will benefit from AI disruption rather than be disrupted by it. Yet the market remains unconvinced for many.

The capital coming out of tech must go somewhere. For now, it is flowing into banks and miners, an extension, in some ways, of the long-anticipated rotation into harder, cash-generative assets, but accelerated by the spectacular nature of the tech selloff.

Volatility as the new normal: implications for communication

This has been described as the most volatile earnings season ever, a phrase that seems to recur every reporting period. The reality is that volatility has become the default setting, driven by the changing structure of the equity market – the rise of index funds, the decline in active fund managers and the impact of event-driven trading strategies, of which earnings reports are a key component.

Companies must accept that predictability is no longer a realistic expectation, creating a strategic environment that demands transparency and clear communication.

The strategic response? Build investor communications strategies that acknowledge uncertainty while maintaining confidence in your business fundamentals. Focus on the controllable factors: operational excellence, capital discipline, and clear strategic direction that includes:

• Concrete competitive advantages in the face of technological change
• How management is preparing the business for medium and long-term scenarios
• Real evidence of business transformation, not just aspirational statements

The path forward

The companies that navigate this volatile landscape most effectively will be those that communicate with clarity, credibility, and candour, demonstrating a clear understanding of how they create value.

Market volatility may be the new normal, but so too should excellence in investor communications be.