Solid year tipped for dollar but outlook mixed for shares
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.
But 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).
Frequently Asked Questions about this Article…
The article says the Australian dollar is expected to stay above parity with the US dollar. The panel's average forecast is about US102¢, with only four panelists predicting it will be below US100¢ by year-end and none expecting it to fall below US95¢.
There is a noticeable spread: Paul Bloxham of HSBC Australia is on the softer side, predicting the dollar could slip to US95¢ by year-end, while Steven Keen (University of Western Sydney) and Andrew McManus (ANZ) expect it to rise to around US105¢. The panel average sits near US102¢.
The article reports a mixed outlook. The S&P/ASX 200 closed last year at 4,648.9 points after a strong rebound, but end-of-year projections range widely—from about 4,000 points (a 14% decline) to 5,500 points (an 18.3% gain). On average, the panel expects a modest 4.3% improvement over the next 12 months.
No. While Australian shares enjoyed a strong rebound in the second half of the past year, the panel on average does not expect that surprising surge to be repeated this year, instead forecasting only modest gains.
The article says expectations vary by market: Japan's Nikkei 225 is tipped to be the weakest, losing an average 7.8% by December 31; London's FTSE 100 is expected to be largely flat, up about 1.4%; and the S&P 500 is forecast to perform best, rising an average 6.6% (after a 13.4% gain over the past 12 months).
Panel forecasts for the 10-year government bond yield span from about 2.0% to 4.2% by the end of the year. The article reports an average expected yield of roughly 3.3%, compared with today's yield reported in the piece at about 3.4%.
Experts mentioned include Paul Bloxham from HSBC Australia (he expects the dollar could fall to about US95¢), Steven Keen of the University of Western Sydney and Andrew McManus of ANZ (both expect the dollar could reach about US105¢), and Stephen Koukoulas of Market Economics (he is the most optimistic for the ASX 200, forecasting it could reach about 5,500 points).
The article highlights a wide range of opinions and modest average expectations: a generally strong Australian dollar (above parity), mixed and uncertain sharemarket forecasts with modest average gains, and varied bond yield projections. For everyday investors, the key message from the article is that markets look uncertain and forecasts differ significantly, so it’s important to be aware of the range of possible outcomes rather than relying on a single prediction.
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