Solid year tipped for dollar but outlook mixed for shares
THE dollar will stay above parity. Only four of our panel are forecasting a dollar below US100¢ by year's end, and none think it will be worth less than US95¢.
The average forecast is for US102¢, so the dollar is expected to remain strong for at least another 12 months. No surprises there.
Paul Bloxham, from HSBC Australia, believes the currency will slip to US95¢ by year's end, while Steven Keen, of the University of Western Sydney, and Andrew McManus of ANZ, think the dollar will rise to US105¢ - the highest of the lot.
But opinions vary greatly when it comes to our sharemarket.
The benchmark S&P/ASX 200 index closed last year on 4648.9 points, up 14.6 per cent on the year, after rebounding strongly in the second half. But projections for the end of this year range from a 14 per cent decline (to 4000 points) to an increase of 18.3 per cent (to 5500 points - Stephen Koukoulas from Market Economics being the most optimistic).
It's a confusing picture and it's not helped by the fact that our panel expects shares to improve by just 4.3 per cent on average over the next 12 months.
However, one thing it does mean is that the surprising recent surge in share prices is not expected to be repeated this year.
Looking to other major sharemarkets, Japan's Nikkei 225 is expected to be the worst of the lot, losing an average 7.8 per cent by December 31.
London's FTSE 100 index is tipped to track sideways, gaining a meagre 1.4 per cent.
The S&P 500 is expected to perform the strongest, increasing by an average 6.6 per cent. It follows a 13.4 per cent increase for the past 12 months. So an increase of that magnitude is not expected to be repeated, much like Australia's sharemarket.
Meanwhile, projections vary for the yield on Australia's 10-year government bonds. By the end of this year, the expected yield spans a range from 2 per cent to 4.2 per cent. But the average expected yield from our panel is 3.3 per cent, representing a 0.1 per cent increase on today's yield (3.4 per cent).