Forecast grim for investors
Published in The Courier Mail, February 2008
Analysts have knocked even more points off their end-of-year forecasts after recent sharemarket tumbles.
At the beginning of last month, CommSec chief equities economist Craig James was tipping the All Ordinaries index to reach 6900 points by June and 7200 points by the end of the year.
But the wild ride experienced by global sharemarkets has changed that view.
CommSec now expects the All Ords and the benchmark ASX 200 to claw their way back to 6000 points by mid year and to 6700 points by December.
This is only slightly higher than last year’s close of 6421.
“While valuations and fundamentals are exceptionally positive, sentiment is fragile, restricting the potential for stronger sharemarket gains,” Mr James said.
BT Financial chief economist Chris Caton agrees returns will be less than in previous years.
“You have to try hard to resist revising (forecasts) every day right now, but I’d say something like 6000 by the end of June and maybe 6300 by the end of December” he said.
“The volatility will continue for some time yet.
“The big question is still the US economy.”
Wealth Within chief analyst Dale Gillham said while the local reporting season should bring some stability back to the market the outlook was still hazy for the overall index.
“We could be at 7200 points or 4800 points by June” Mr Gillham said.
“The market is not being run by logic but rather over-reaction due to the way trading systems operate.
“Many of the problems are caused by the way people and institutions are leveraging and the electronic way in which we trade today magnifies how much and how far.”
Wiseowl.com senior equities analyst Simon Guzowski said the market was likely “to keep being a roller-coaster ride and unlikely to make major headway in either direction.”
“With that in mind the market could be around the 5600 level in June,” Mr Guzowski said.
But the picture could start to improve by the end of the year, bringing the All Ords closer to 6400 he said.
“US interest rate cuts could start to have a positive effect on the real economy, as could tax cuts,” he said.
“For (optimism) to hold we would need to see Europe avoid further deterioration economically and we would also need to be sure that the flow-on effects from the US are not having a material impact on growth from China or India.”
