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"Wall of worry'' not enough to bring out the bears for another year

Business

There appears to be nothing that can stop the climb of Australia’s stock market and housing prices over the next 12 months.

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Wilsons Advisory has told clients that while the Australian market was due for a correction, the big economic concerns over China and the US were not enough to stop the march of Australian equities.

Similarly, housing experts are tipping continued growth in the market, although not at the levels of the past eight months during which the market rose nationally by more than 15 per cent and 18 per cent for the year to the end of August.

The ASX 200 is now up 23 per cent on a year ago, despite the lockdowns in the two biggest states.

Wilsons told clients that there was a “wall of worry” in the US that seemed to be increasing, as was volatility, which had been caused by concerns the quantitative easing was going to be tapered, a potential stalemate in lifting the US debt ceiling, potential hikes in corporate tax and concerns of a major downturn in China.

“In short we do not see any of these, or any combination of these concerns, as the likely catalyst for the transition to a bear market,” the Wilsons client note said.

“A 10 per cent correction to these concerns cannot be ruled out, particularly given the market has run so hard and is overdue for a pullback.

“We still have a constructive 12 months on global and local equities with at least an average return expected (about 10 per cent). Moreover, we still see the risks around this expectation as skewed to the upside given the supportive growth and policy backdrop.”

Real estate expert Michael Yardney said Australia’s housing market had grown dramatically but it was still well behind 54 other countries.

He said the factors that caused the boom, such as low interest rates, low stock levels, fear of missing out and the Covid-inspired trend of upgrading the home, all still existed.

“As Australia works its way through its Covid cocoon and our economy picks up, property prices will continue rising,” Yardney said.

“And when our borders open and immigration returns the current supplier properties won’t accommodate the increasing demand, again fueling property price growth.”

 

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