War, Politics Eclipse Economics on Davos Leaders’ Minds

Never mind interest rates, inflation or recession. The economic concerns that usually preoccupy the global elite at their annual gathering in Davos are taking a back seat to hot war in Ukraine and the Middle East, cold war between the West and China and watershed elections from India to the U.S.

For government and business leaders, it is a disorienting departure from a world in which fortunes were mainly driven by financial forces. The World Economic Forum, which hosts the meeting, is now the de facto world geopolitical forum.

“There’s a higher-level issue than the economy, which is geopolitics,” said Christian Mumenthaler, chief executive of reinsurance giant Swiss Re, which insures risks around the world. Geopolitics hasn’t been so big an economic threat since the height of the first Cold War in the 1980s, he said.

“We’re starting this year with the longest list I ever recall of potential disruptions,” said Christian Ulbrich, chief executive of real-estate company JLL, which operates around the world. “You really have to run your organisation in an extremely agile way so that you can react immediately.”

Longtime Davos attendees came of age in a world in which products, capital and people flowed ever more freely. But globalisation began fragmenting in 2016 when Britain voted to leave the European Union and Donald Trump was elected president—and who went on to withdraw from a global climate accord and a trade pact with Pacific nations and then hike tariffs sharply, especially on China.

Deglobalisation has gathered speed with the pandemic, Russia’s invasion of Ukraine, the intensifying rivalry between the U.S and China and the newfound appeal of industrial policy—governments directing resources to favoured home industries. That is over and above the hazards thrown up by the natural world, such as extreme weather.

The upshot is that political events that were once peripheral to business leaders’ concerns are now central, especially when optimism is high that major economies will lower inflation without recession, so-called soft landings.

The U.S. election is on everyone’s minds because of the potential for Trump to return to the White House. On Monday, Trump won the first Republican nominating contest, in Iowa, by a wide margin.

“Every conversation begins with a query about my assessment of the outcome of Iowa, who’s going to win New Hampshire, and what are the odds of Trump 2.0,” said Tim Adams, president of the Institute of International Finance, a Washington-based group of international banks, and a former senior Treasury official under President George W. Bush. The questions are driven by trepidation, curiosity and fear that “the U.S. retreats, engages in protectionism, isolationism.”

One European bank chief said he has conducted “game-boarding exercises” to figure out how a Trump administration could play out for his business.

The U.S. election is one of many taking place this year, and for some companies, it isn’t necessarily the most salient. Last Saturday, Taiwan elected as president the candidate most opposed by Communist-ruled China, which is pressing for reunification with the self-governing island. Taiwan is home to Taiwan Semiconductor Manufacturing Co., the world’s dominant supplier of the most advanced microchips.

Many major tech companies depend on those chips. They must reckon with the possibility that military or economic coercion by China, or even war that draws in the U.S., could interrupt that supply. U.S. restrictions on investment and trade related to crucial technologies, including chips, have already disrupted what was once one of the world’s most integrated industries.

The threat to the chip supply “is a risk. That needs to be factored into all analyses you can do,” said Börje Ekholm, chief executive of Swedish telecommunications manufacturer Ericsson. The company has been focused on diversifying its supply chain for semiconductors and other parts since 2018, he said. “You also need to think about how you’re going to manage the situation where chip supply will be constrained.”

Gita Gopinath, the No. 2 official at the International Monetary Fund, said business leaders are worried about geopolitics interfering with trade and investment for good reason: “Fragmentation is a reality, it’s not just a threat.”

While trade has slowed everywhere since Russia’s invasion of Ukraine, it has slowed down more between blocs of allied countries—such as between the West and China or Russia—than within blocs. She said this shows that efforts to confine trade restrictions to strategic sectors, such as high tech, are failing, and a more general decoupling between blocs might be under way.

A study released by the McKinsey Global Institute Wednesday echoed the IMF’s findings. China, Germany, the United Kingdom and the U.S. have all reoriented trade toward allies or nonaligned countries like Mexico and Vietnam, it said

China’s share of U.S. imports of laptop computers and mobile phones, though not subject to tariffs, fell between 2017 and 2022, with much of that share going to Vietnam, the report said. Mexico, it noted, became the largest trade partner of the U.S. last year. Germany all but halted imports of natural gas from Russia while vastly increasing imports from Norway, a fellow member of the North Atlantic Treaty Organization.

That politics, not economics, might govern where companies sell and invest is a new reality that is taking some getting used to. Mike Henry, chief executive of Australian coal and mineral company BHP, said the company has always advocated free trade as the most efficient way to bring commodities to market. “A world of open trade and where countries are able to compete on natural advantage—that’s the world of the past. That’s not the reality we live in today.”

A few years ago China, upset with Australia for demanding an inquiry into Covid’s origins, cut many imports from the country, including coal from BHP, which saw its sales there fall. Though relations between Australia and China have since improved, BHP has since found other markets for that coal. Still, Henry said that in time, economic factors such as shipping rates will once again influence where it sells.

Some executives see hopeful signs, in particular that a rapprochement between China and the U.S. that began last fall will continue, in part because China is trying to help its faltering economy.

Geopolitical tensions also have beneficiaries. After artificial intelligence, the loudest buzz in Davos might be directed at India. Many executives called it their most promising foreign market, and its appeal has only grown now that Russia and much of China are off limits.

“When disruptions take place, people are trying to hedge,” said Hardeep Singh Puri, India’s minister of oil and gas. “But India has a growth story of its own. That is what is driving interest in India.”

For some companies, geopolitical tensions are weighing on employees, not just management. “People are concerned about what’s going on in the world,” JLL’s Ulbrich said. Conflict, or the threat of it, in Europe, Israel/Gaza and China weighs on people, he added. “They don’t know what’s going to happen and look to other people, leaders, for what’s going to happen, but leaders don’t know either.”

—Chip Cutter and Alex Frangos contributed to this article.

Reporting season has once again reminded investors that a strong profit does not guarantee a rising share price, and a large loss does not always trigger a sell-off. What matters most is how each result compares with expectations and, increasingly, what management says about the year ahead. During the August 2026 season, companies offering credible turnarounds or unexpectedly strong guidance were rewarded handsomely, while those flagging weaker margins, slowing demand or greater uncertainty were punished.

The following ranking draws on Morningstar’s review of 164 ASX-listed companies and measures each company’s share-price movement on the day it reported. This captures the market’s immediate response to the earnings announcement, before subsequent economic developments, dividends and company-specific news cloud the picture. Here are the five biggest winners, and the five hardest-hit losers, of the season so far.

The five winners

1. Bapcor (ASX:BAP): +41.0%

Bapcor delivered reporting season’s largest relief rally after presenting early evidence that its troubled automotive-parts business was stabilising. Although underlying revenue fell 1.8% to $1.92 billion and underlying NPAT collapsed 85% to $10.8 million, underlying EBITDA of $152.5 million exceeded guidance.

More importantly, working-capital initiatives released $68.5 million in the second half, lifting cash conversion to 109.4% and reducing net debt by 63% to $135 million. The statutory loss was $431.6 million, largely because of non-cash impairments. Investors focused on improving operational momentum, stronger liquidity and management’s expectation of modest FY27 revenue growth.

2. Zip Co (ASX:ZIP): +18.2%

Zip comfortably surpassed its FY26 targets, sending the buy-now-pay-later provider’s shares sharply higher. Transaction volume rose 23% to $16.7 billion, while cash earnings before tax, depreciation and amortisation jumped 58% to a record $268.9 million. Statutory profit climbed 46% to $116.4 million, and the cash operating margin expanded by 4.2 percentage points to 20%.

The strongest signal was guidance for FY27 cash earnings of $340 million—around 26% growth and above analysts’ forecasts. US transaction volume increased 42.5% and now represents three-quarters of group volume, offsetting weaker customer activity in Australia.

3. CSL (ASX:CSL): +17.3%

CSL’s result was hardly spectacular in isolation, but it cleared a market bar that had fallen dramatically following earlier downgrades and restructuring announcements. Underlying NPATA was US$3.1 billion, down 2% in constant-currency terms, while operating cash flow reached US$3.51 billion.

CSL maintained its full-year dividend at US$2.92 per share and completed a A$1 billion buyback. The real catalyst was FY27 guidance for approximately 5% underlying profit growth, compared with market expectations closer to 2%. After an extended period of earnings disappointments, investors interpreted the outlook as evidence that CSL’s core plasma business was approaching a sustainable recovery.

4. Judo Capital (ASX:JDO): +16.9%

Judo Capital demonstrated strong operating leverage as its specialist business-lending franchise expanded. Full-year profit before tax rose 34% to $168.1 million, while pre-provision profit increased 42%. Gross loans and advances grew 18% to $14.7 billion, reaching the top of the bank’s guidance range and comfortably exceeding broader system growth.

Deposits increased 24% to $12.2 billion, return on equity improved by 1.1 percentage points to 6.4%, and earnings per share rose 29% to 9.9 cents. Reaffirmation of the FY27 outlook gave investors confidence that loan growth could continue without sacrificing margins or credit quality.

5. Super Retail Group (ASX:SUL): +15.8%

The owner of Supercheap Auto, rebel, BCF and Macpac reported record sales of $4.2 billion, up 3.2%, despite cautious discretionary spending. Profitability went backwards: normalised profit before tax fell 7% to $306 million and normalised NPAT declined 2.8% to $226 million as transformation spending weighed on margins. Nevertheless, the result exceeded subdued expectations, online sales grew 5.3% and membership across the group’s loyalty programs reached 13.1 million. Investors were also encouraged by positive early FY27 trading, stable gross margins and continued market-share gains. A fully franked 33-cent final dividend added to the appeal.

The five losers

1. Hansen Technologies (ASX:HSN): –21.2%

Hansen’s historic result met expectations, but investors recoiled from its outlook. The utility and communications software provider achieved an underlying EBITDA margin of 31%, exceeding its 30% target, while generating strong cash flow. However, management designated FY27 an “investment and transition year”, signalling a roughly five-percentage-point margin contraction as spending on products, sales capabilities and organisational changes increased.

Revenue had already been broadly flat, leaving investors concerned that the investment program would depress earnings before new growth appeared. Leadership changes, including the chief executive’s departure, added uncertainty. Management expects revenue growth and margins above 30% to return in FY28, but the market was unwilling to wait.

2. Life360 (ASX:360): –19.4%

Life360’s headline growth was impressive: quarterly revenue rose 38% to US$159 million, subscription revenue increased 31%, and adjusted EBITDA climbed 53% to US$31.1 million. Monthly active users reached 102.4 million and paying circles grew 27% to 3.2 million. The sell-off reflected expectations rather than a collapsing business.

Net income fell 18%, the net margin contracted from 6% to 3%, hardware shipments dropped 18%, and full-year EBITDA guidance was merely maintained. After a strong valuation run, investors wanted a larger upgrade and clearer evidence that heavy investment in advertising, international expansion and artificial intelligence would generate additional earnings.

3. PEXA Group (ASX:PXA): –17.0%

PEXA reported a 7% increase in continuing-operations revenue and 12% EBITDA growth to $152 million, accompanied by a two-percentage-point margin expansion. Free cash flow increased 39%, suggesting the core Australian electronic-conveyancing platform remained highly profitable. Investors instead concentrated on management’s warning that property-transfer volumes could decline, alongside regulatory uncertainty surrounding the fees PEXA can charge.

The company is also continuing to invest heavily in its loss-making international expansion. Morningstar considered the market reaction excessive, arguing that structural transfer-volume assumptions had not materially changed, but the combination of softer near-term activity and regulatory risk overwhelmed the respectable headline numbers.

4. SEEK (ASX:SEK): –14.3%

SEEK produced solid FY26 figures, including 10% revenue growth to $1.20 billion, a 15% rise in EBITDA and 28% growth in adjusted earnings per share. It also lifted its fully franked annual dividend by 13% to a record 52 cents. Those achievements were overshadowed by falling paid job-ad volumes and cautious FY27 assumptions.

The statutory accounts included a $201 million loss from the SEEK Growth Fund and $377 million of significant items, making the headline result considerably less attractive. Investors were particularly concerned that economic weakness could limit volumes while the company continued investing in platform integration and artificial-intelligence products.

5. JB Hi-Fi (ASX:JBH): –12.3%

JB Hi-Fi’s full-year result was broadly respectable, with group sales rising 5% to $11.1 billion and underlying earnings per share increasing 6% to $4.48. The damage came from its current-trading update. Australian sales were almost flat during the June quarter and deteriorated further in July, while earnings in the core Australian electronics business fell 3.6%.

Housing-related categories were particularly weak as higher living costs and interest rates constrained household budgets. With JB Hi-Fi entering the season on a demanding valuation, an in-line historic result was not sufficient: the loss of sales momentum prompted investors to rapidly reduce their expectations for FY27.

Overall, the season showed that share prices react less to whether profits rose or fell than to the gap between results and expectations. Bapcor was rewarded for being less troubled than feared, while several fundamentally profitable companies were punished because their outlooks failed to justify elevated valuations.