Following a challenging 12 months for Australian investors, CommSec has tipped that the local sharemarket will rise by 7 to 9 per cent during the 2022-23 financial year.
At the start of this year, CommSec predicted that the Australian sharemarket would grow by 5 per cent over calendar year 2022. However, the firm has now revised its forecasts to a fall of 7 to 9 per cent in 2022 followed by a gain of 5 to 8 per cent in 2023.
“Australian companies are well cashed up with profits at record highs. Companies are choosing to pass on higher costs to consumers but they will find it harder to do so as interest rates rise further and spending growth slows,” CommSec noted.
“With margins pressured, earnings expectations are likely to adjust lower as growth slows. But cheaper valuations, attractive dividend yields and Australia’s likely relative economic outperformance is supportive of local shares.”
Reviewing the last financial year, the firm reported that the Australian All Ords and S&P/ASX 200 indices both dropped by around 10 per cent on the back of a 25 per cent gain in 2020-21.
At the end of 2021-22, the All Ords sat 14.6 per cent below its record high set on 13 August 2021 and the S&P/ASX 200 was down 13.9 per cent from its high set on the same date.
CommSec noted that the challenges of the past 12 months had been particularly taxing, with investors forced to contend with increased volatility driven by the pandemic, the war in Ukraine, supply chain disruptions, high inflation, rising interest rates and fears of a recession.
“Supported by a strong domestic economy, and an easing in inflationary pressures, the Australian sharemarket is tipped to claw back losses over the next 12 to 18 months. But with rapid changes taking place as the economy adapts, investors need to remain alert, pivoting their portfolios as needed,” said CommSec chief economist Craig James.
In comparison to overseas markets, Australian shares suffered similar falls to those seen in Europe’s STOXX 600 (-10.1 per cent) as well as the US Dow Jones (-10.8 per cent) and S&P 500 (-11.9 per cent) benchmarks during 2021-22, while the Nasdaq was down 24 per cent.
Japan fared slightly better with a fall of 8.3 per cent and the commodity-linked UK FTSE managed to record a gain of 1.9 per cent.
Locally, the best performing sectors of the last financial year were utilities (29.3 per cent) and energy (24.5 per cent) while technology (-38.7 per cent), consumer discretionary (-22.8 per cent) and property (-15.4 per cent) ranked as the worst performers.
Additionally, CommSec said that total returns on Australian shares fell by 7.4 per cent during 2021-22 after surging 30.2 per cent in 2020-21.
“In volatile times, it’s always important for investors to assess over longer time frames. While down over the past year, total returns on shares have risen by around 8.5 per cent per annum over the past five years,” added Mr James.
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
