Oliver's Insights - Monetary tightening & the recovery in growth assets
This edition looks at the outlook for shares after their recent break out to new recovery highs on the back of good economic news.
The key takeouts are:
- After very strong gains in equity markets (and other growth assets) from the lows in March last year, the experience after past bear markets suggests rougher and more constrained gains ahead.
- This reflects a transition in the investment cycle from the 'sweet spot' to a somewhat tougher environment, where shares are more dependent on earnings growth but momentum in leading growth indicators peaks and cost pressures and interest rates start to rise.
- But while this may cause gyrations and more constrained gains, the broad trend in shares and other growth assets is likely to remain up. We are still early in a typical bull market, earnings growth is likely to be strong and global interest rates are likely to remain low. Our year end target for the Australian ASX 200 and All Ords indices is 5600.
