Clime Asset Management chief investment officer John Abernethy said a US economic recovery and continued Chinese growth will drive the local market higher for the next four years.
“There are a number of tailwinds – positive factors – that will drive the local market higher, including continued Chinese economic growth, for the next four years,” Mr Abernethy said.
“Australia will also be buoyed by an improving US economy. Over the next four years we will have the world’s two biggest economies, America and China, helping world growth."
Mr Abernethy added that a weakening Australian dollar, which is a “reasonable certainty over the next four years”, will boost trade-based sectors and inbound tourism and in turn boost the local equity market.
However, there are a number of negative factors, such as the depreciation of the euro, which Mr Abernethy said will impact the local equity market.
“That means the [Australian dollar] appreciates against the euro and it will affect some of our trade on a comparative basis,” he says.
Mr Abernethy said Australia’s economic growth and market performance will be determined by “political will” as the government needs to sit down and do the “necessary restructuring of the taxation system” to help capital flows in a “productive manner”.
“Tony Abbott’s government is due to go to the polls before January 2017, which will create further uncertainty for investors,” Mr Abernethy said.
“Australian companies are increasingly hoarding cash and choosing to pay out higher dividends to investors rather than reinvest the capital in growth opportunities,” he said.
Mr Abernethy added that the reinvestment cycle has to be “stimulated again” since the local equity market is not reaching its true potential due to lack of investment.
