Steve dug up an old article this week. The headline read "Wall Street's Outlook for 2000." Published by CBS MarketWatch on December 31, 1999. The opening lines remain extraordinary, particularly given what happened next.
That was Wall Street's mood on the day before the year 2000 began. Twelve weeks later, the S&P 500 began the slide that would erase nearly half its value over two and a half years. The CAPE ratio at the time of that article was 44.2. The CAPE ratio today is 42.7. The mood feels strikingly familiar.
We are not predicting a crash. We are pointing out that universal bullishness at extreme valuations has historically been one of the most reliable contrary indicators in markets. The CAPE level alone does not tell you when. It tells you that forward returns from these levels have been thin to negative in every prior instance. The 1999 article is a useful artefact to hold up against the consensus of 2026.
The geopolitical picture has not improved. The Strait of Hormuz situation remains unresolved. The tank-bottoms dynamic flagged by Carlyle's Currie continues to filter through to physical markets. And Steve's weekly video review walks through the through-lines connecting energy, regime change, the Quad framework, and what it means for portfolio positioning over the next 12 months.
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Australia's Q1 2026 National Accounts landed this week. The headline number was 0.3% qtr / 2.5% yr, the softest quarterly print since Q2 2024. The story underneath is more interesting, and more concerning.
(Softest since Q2 2024)
(Strongest since 2011)
(Quarterly fall)
Westpac's analysis is unambiguous: investment in data centres drove all the growth this quarter, and around 0.8 percentage points of GDP growth in year-ended terms. Outside that single category, the economy is weak. The pick-up in household consumption was offset by a fall in public demand. The economy was clearly slowing even before the conflict in the Middle East and the latest rate hikes had really started to bite.
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Westpac flagged the possibility of a quarterly contraction in Q2 2026. If that prints, it will be the first quarterly decline in Australian GDP since the GFC, excluding COVID. The Middle East conflict impacts will only fully appear in Q2 and Q3 numbers. The cyclical upswing has ended.
Outside of data centres, the picture for property investors is also showing signs of strain. Days-on-market are climbing across every major capital city, and the increases are not small.
2. Hobart — 21 days (+3)
3. Townsville — 28 days (+9)
4. Newcastle — 28 days (+6)
5. Brisbane — 29 days
Every major capital recording an increase in days-on-market compared to last month is exactly the kind of broad-based deterioration we have been pointing to. The previous bull market in property assumed permanent demand acceleration and infinite finance availability. Neither holds today.
The ASX has continued to grind sideways with sector dispersion widening. The S&P 500 Shiller CAPE has now climbed to roughly 42.7, edging up another step from last week and continuing to close in on the December 1999 all-time high of 44.2.
The de-risking of rare earth supply chains away from China is a multi-decade theme we continue to back. But it is not without cost. The Financial Times this week ran a feature on the environmental damage now being raised as concerns about the expansion accelerate.
This is the tension at the heart of the rare earth investment thesis. Western processing capacity has to come online, but the processing itself is dirty, water-intensive, and politically toxic. Companies seeking to boost western supplies face legal and community obstacles. Expect this to feature heavily in the next phase of the buildout, including project delays, cost overruns, and the occasional "rare earth expert" appearing out of nowhere offering opinions on environmental impact.
The Lynas Malaysia experience over the past decade is the template. Communities push back. Permits get litigated. Costs blow out. Projects that look great on paper take five years longer than expected. Selectivity remains the rule.
This month's live members call covers exactly what is in this week's edition. The 1999 parallel, the CAPE at 42.7, Australia's Q1 GDP weakness, the property days-on-market trend, the rare earth environmental story, and how to position your portfolio for the next 12 months. Bring your questions. Recording available afterwards.
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We will continue to update the sector scorecards, momentum indicators, and macro notes as the theme unfolds. If conditions shift, you will see it reflected in the Wells calls, Signals and Noise Premium updates, and portfolio insights.
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