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Global asset manager VanEck has declared that the era of big-bank-led performance on the ASX may be over, urging investors to rotate into materials, select industrials and mid-caps as the concentrated bank trade unwinds.
The call, made in VanEck's 2026 Australian Equities Outlook released this week, lands as Commonwealth Bank of Australia (ASX: CBA) suffered a record single-day share price fall of 10.4 per cent on May 13, erasing $25 billion in market value in the wake of the federal budget introducing tighter rules on property investment and after the lender's third-quarter cash profit of $2.7 billion came in roughly 2 per cent below analyst expectations.
VanEck's head of investments Russel Chesler says CBA alone accounts for about 10 per cent of the S&P/ASX 200, making the index dangerously top-heavy.
"The bank-heavy passive trade is the most crowded and expensive expression of Australian equities," says Chesler, warning that a "regime shift" away from financials is under way.
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.
The ASX 200 Materials sector has climbed 44 per cent since July 2025 compared with just 3.6 per cent for the broader ASX 200 over the same period, marking the sector's biggest outperformance since 2009.
Brent crude has surged above US$100 per barrel amid the US-Iran conflict, adding further momentum to the resources trade.
VanEck's outlook argues that while materials earnings per share fell 17.6 per cent in FY25, consensus forecasts point to a 13.2 per cent rebound in FY26, positioning the sector as the primary growth engine for Australian equities over the next 12 months.
The broader ASX 200 trades at 18.3 times forward earnings, well above its long-term average of 14.8 times, a premium VanEck attributes largely to inflated bank valuations rather than broad-based earnings growth.
“We could be seeing the start of a regime shift," says Chesler.
"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.”
Several macro headwinds are converging on the banking sector.
The RBA cash rate sits at 4.35 per cent, with markets pricing a further 60 basis points of hikes to 4.7 per cent by the end of 2026.
The RBA's May 2026 Statement on Monetary Policy forecasts headline inflation peaking at 4.8 per cent in the second quarter of 2026, suggesting rate relief remains distant.
Federal budget changes to negative gearing and capital gains tax concessions represent an additional drag on bank lending volumes, with VanEck flagging the policy shift as a structural headwind for the sector's earnings trajectory.
CBA's third-quarter update on May 13 crystallised these concerns.
While cash profit rose 4 per cent year-on-year to $2.7 billion, the result missed analyst expectations, triggering the largest single-day sell-off in the bank's history.
VanEck is promoting an equal-weight approach to Australian equities as an alternative to market-cap-weighted passive strategies that concentrate exposure in a handful of large banks.
The Sydney-based arm of the global fund manager oversees the MVW Australian Equal Weight ETF, the MVR Australian Resources ETF and the MVB Australian Banks ETF, giving it a commercial interest in the diversification thesis it advocates.
However, Morgan Stanley analysts have separately expressed conviction that the materials rally has further to run.
Chesler says the current environment rewards investors who look beyond the top of the ASX 200, arguing that an equal-weight strategy captures the earnings recovery in materials and industrials without the concentration risk embedded in passive bank exposure.
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