Economists at CommSec have predicted that the Australian share market could rise by up to 7 per cent over the coming year, rebounding from the falls suffered in 2022.
Last year, Australia’s benchmark S&P/ASX 200 experienced its largest drop in four years, ending 2022 down 5.5 per cent in what CommSec described as a tough year for investors.
While anticipating a rebound in 2023, the firm also suggested that tough conditions are expected to continue to challenge Australian investors as they have for the past three years.
“High levels of inflation, continued uncertainty about interest rates, tight labour markets, high energy prices, the war in Ukraine and the re-opening of the Chinese economy pose both risks and opportunities for investors,” said CommSec chief equities economist Craig James.
“While the coming year certainly won’t be without its challenges, we are tipping a modest gain for the benchmark S&P/ASX 200 index in 2023 of 4 to 7 per cent to near 7,350 to 7,550 points.”
Despite the wide range of challenges and significant global volatility, Mr James pointed out that the local share market managed to outperform many of its peers over the past year.
Major US share indexes posted their biggest declines since 2008, with the Nasdaq plunging nearly 33 per cent, the S&P 500 dropping 19 per cent and the Dow Jones falling 9 per cent.
The European share market was down around 13 per cent and the Japanese share market was down 9 per cent, while the UK share market outperformed with a 1 per cent gain.
“There’s no doubt that Aussie share market investors had a tough year in 2022. But the good news is that Australian share indexes held up better than in most other advanced markets due to an outperforming economy,” said Mr James.
Unlike other industrialised economies like the UK, US, EU and Japan, Australia is expected to avoid a mild recession in the year ahead, with Commonwealth Bank economists predicting that economic growth will slow from 3.5 per cent in 2022 to 1.1 per cent in 2023.
Mr James noted that the modest gains expected for the Australian share market in 2023 will remain dependent on a number of key factors in the coming months.
“There is upside potential to the forecasts should Chinese authorities be successful in re-opening their economy. And an end to the war in Ukraine should boost investor sentiment across the globe,” he said.
“But deeper recessions in major economies from persistently high inflation and interest rates could lead to downward revisions on Aussie share market forecasts.”
