The CBA crack: VanEck says next leg of the ASX rally won't be led by the banks

Global asset manager VanEck has warned that bank-led leadership on the ASX may be coming to an end, with this week’s $30 billion wipeout of Commonwealth Bank’s market value signalling a potential rotation that would shape equity returns through 2026 and beyond.

In its 2026 Australian Equities Outlook released today, VanEck argues that the conditions which made the major banks the default trade for a generation of Australian investors - disinflation, falling rates, unbroken housing credit growth, and benign provisioning - have all reversed simultaneously. What replaces them is a market that rewards earnings durability over index weight, and pricing power over passive ownership.

Russel Chesler, Head of Investments at VanEck, said “We could be seeing the start of a regime shift. We’re in a structurally different earnings environment to the one that delivered the last five years of bank performance. Australian investors may need to look beyond the big banks to capture the next phase of opportunity on the ASX.”

VanEck's analysis points to a market that is already rotating, even if the headline index has masked it. The S&P/ASX 200 materials sector has risen more than 50 per cent over the past year on record copper prices and steady iron ore, while the S&P/ASX All Tech Index has fallen more than 30 per cent over the same period. Mid-caps have outpaced the top 20 on an earnings-growth basis through the most recent reporting season.

“This is no longer an index-level market. The S&P/ASX 200 is being pulled in two directions and the gap between the winners and the losers within the benchmark is wider than at any point since the post-COVID rebound. When dispersion is this high, equal-weighted approaches and active sector tilts do the heavy lifting that beta used to."

"Concentration risk in the major banks now cuts both ways. They have driven the index higher for years. They can drive it lower just as quickly. Investors should be mindful that CBA alone accounts for roughly 10 per cent of the S&P/ASX 200. When a single stock can move the benchmark by half a per cent on a single quarterly update, you are no longer running a diversified portfolio.” said Chesler.

VanEck’s analysis three key areas for better risk-adjusted returns.

• Materials, where the supply-side story is structural. Chinese rare earth export controls, the global infrastructure cycle, copper's secular deficit, and Australia's position as the supply base of choice for critical minerals together create a durable tailwind.

• Select industrials with monopolistic or quasi-regulated cash flows. Aurizon Holdings (freight rail), Transurban (toll roads) and Telstra (telecommunications infrastructure) all have inflation-linked revenue streams, defensible market positions, and valuations that have de-rated relative to the banks. In a higher-for-longer rate environment, these are the businesses where pricing power and asset quality compound quietly.

• Mid-caps, where the earnings beats have actually landed. The most recent reporting season produced solid mid-cap earnings revisions, yet the segment trades at a discount to the ASX 50 on forward earnings.

The analysis also shows the S&P/ASX 200 is trading above its long-term average valuation, but remains less stretched than the S&P 500 and the Nikkei indices.

"Australia screens as relatively attractive when set against global peers, particularly the United States, where index-level multiples now require near-perfect execution on AI capex and earnings to be sustained. If geopolitical volatility subsides and the earnings recovery continues to broaden, Australia could be one of the better risk-adjusted equity trades globally in the second half of 2026.

"But that thesis only works if you own the right parts of the market. The bank-heavy passive trade is the most crowded and an expensive expression of Australian equities. The next phase of the ASX rally is unlikely to lift all boats. Investors will need to be more deliberate about where they take risk,” said Chesler.

The VanEck 2026 Australian Equities Outlook can be downloaded here.