After a white-hot start, Australia’s top equity strategists are positioning for only a small rise in the sharemarket this year as domestic equities face increasing challenges.
The country’s top equity strategists are calling time on the Australian sharemarket’s dazzling rally, warning investors to expect more modest returns in 2022 despite the benchmark getting off to a spectacular start to trading by achieving its second-highest ever close on Tuesday.P/ASX 200 Index is expected to rise marginally over the coming 12 months as the market grapples with slower earnings growth, ongoing inflationary pressures, and central bank tightening.
“Looking ahead into 2022, we expect more pedestrian returns for Aussie equities," agreed Hasan Tevfik, senior research analyst at MST Marquee. "We expect the bull market will continue, but it will be less exciting, at least at the index level.", and particularly, companies that are services-focused and poised to capitalise on a considerable catch-up in demand. This includes Qantas Airways, Ramsay Health Care and Sky City Entertainment.
“Housing demand has been brought forward during the pandemic, housing finance is already starting to slow, household leverage is hovering around peak levels, and housing valuations appear extended,” he said. “What this means for valuations is that they still remain at levels higher than their long-term average, but as financial conditions including interest rates become tighter in 2022, it would limit price-earnings expansion,” said chief investment officer for Credit Suisse Australia, Andrew McAuley.
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