This year will likely to see “rough patches” in the stockmarket as the country emerges from the COVID-19 pandemic.
In a note from chief economist at AMP Capital, Shane Oliver, he said this would likely replicate the situation following the Global Financial Crisis (GFC) in 2010.
While the ASX 200 ended 2010 up 1.5%, the performance was characterised by two downturns in mid-January and again in May.
Performance of ASX 200 in 2010
This could be repeated this year, Oliver said, as the country fought to emerge from the pandemic and its associated market volatility as well as distribute a vaccine. However, Australian shares were still likely to return 12% compared to 8% returns for global shares as Australia had stronger policy stimulus, had controlled the virus better and benefitted from high exposure to China and Asia.
Oliver said: “After having run up so hard since early November, shares are vulnerable to a decent short-term pullback (say 5%-15%) and 2021 is likely to see a few rough patches along the way (much like we saw in 2010 after the recovery from the GFC) but looking through the inevitable short-term noise, the combination of improving global growth and low interest rates augurs well for growth assets generally in 2021.
“Australian shares are likely to be relative outperformers returning around 12% helped by better virus control, enabling a stronger recovery in the near term, stronger stimulus, sectors like resources, industrials and financials benefitting from a rebound in growth and as investors continue to drive a search for yield benefitting the share market as dividends are increased.”
Those stocks and sectors which had done well from the pandemic would likely see performance tail off while those that were benefitting from the recovery would perform better. This included resources, industrials, financials and tourism stocks.
