The Australian sharemarket produced double-digit returns for investors in the financial year just ended and most of the expert commentary points to further growth in the year ahead.
The S&P/ASX 200 Index rose 8.3 per cent in the 2017/18 financial year, while the S&P/ASX 200 Accumulation Index (which includes dividend payments) rose 13.4 per cent.
Small companies did even better. The S&P/ASX Small Ordinaries Index was up 22 per cent during the year.
Sectors that performed strongly include autos and components, which rose 44 per cent, pharmaceuticals and biotech (up 43 per cent) and food, beverages and tobacco (up 40 per cent) and energy (up 38 per cent).
The telco sector fell 29 per cent, banks were down 10 per cent and utilities were down 7 per cent.
CommSec chief economist Craig James says: “Sharemarket returns have only fallen once in the past nine years.
“The economic and financial metrics remain encouraging. Australia has underlying below the Reserve Bank’s 2 to 3 per cent target band, at 1.9 per cent. Economic growth is lifting, with growth in in the March quarter the fastest in six years. Business conditions are just below 20-year highs. The cash rate remains at record lows and unemployment is at a five-year low of 5.4 per cent.”
CommSec expects the All Ordinaries Index, which finished the financial year at 6289 points, to be near 6400 to 6600 points in December and 6600 to 6800 in June 2019 – an increase of up to 8.1 per cent over the next 12 months.
Citi strategist Tony Brennan is forecasting that the S&P/ASX 200 will reach 6500 by the end of the year (it closed at 6194 on Friday) and 6650 by the end of June next year. That is an expected increase of 7.4 per cent over the next 12 months.
AMP Capital chief economist Shane Oliver says: “We expect returns to slow a bit over the new financial year but they should still be reasonable, as the global and Australian economies are likely to keep growing and this will help profit growth at a time when monetary policy remains easy.
“While we continue to see sharemarkets being higher by year end, we are likely to see some volatility and weakness between now and then, as the US trade threat could get worse before it gets better and as worries remain around the Fed, President Trump in the run-up to the US mid-term elections, China, emerging markets and property prices in Australia.”
Julian Beaumont, the investment director of the country’s most successful Australian equity fund manager, Bennelong Australian Equity Partners, gave a forecast earlier this year, in which he said the market was set up for a return in the high single digits this year.