There will be a slightly more challenging investment climate this year as markets face the prospect of higher interest rates, according to Colonial First State head of investment market research Stephen Halmarick.
Rising interest rates and the high expectations for profit growth will challenge companies with a need to match and exceed these growth expectations for continued gains, Halmarick said in his latest market report.
A recovering economy, improved balance sheets and recent cost control will help. However, rising official interest rates are seen to potentially curb the strong growth witnessed in 2009.
The report has found the Australian economy to be in robust health, with third quarter GDP results revealing business confidence at seven-year highs and solid gains on the Australian stock exchange despite record sharemarket volatility last year.
"Last year was a good year for Australian equity investors, with returns exceeding 37 per cent," Halmarick said.
"Despite the relatively low December trading volumes at the Australian share market, the S&P/ASX 200 Accumulation Index was nevertheless able to rise 3.7 per cent."
The Australian economy recorded 0.2 per cent growth, pushing the annual growth rate up to 0.5 per cent - a result which continues to outperform other developed economies.
Unlike the US, whose recovery is driven by consumer spending, Australia's recovery was driven by government spending, household consumption and dwelling investment.
