AMP chief economist Shane Oliver has warned investors to expect only moderate gains this year with ASX 200 returns unlikely to repeat their double-digit gains.
AMP chief economist Shane Oliver has warned investors should expect another volatile year in 2026, even as returns are likely to remain positive following three years of strong market gains.
Oliver said 2025 delivered another strong year for investors, supported by better-than-feared global growth, solid corporate profits and interest rate cuts from central banks.
The ASX 200 returned 10.1 per cent during the year while balanced superannuation funds returned around 9 per cent for the year.
But the index’s return was far lower than global peers with the S&P 500 returning 16.4 per cent, the UK’s FTSE 100 returning 21.9 per cent, Japan’s Nikkei 225 returning 26.2 per cent over the same period.
Despite the double-digit performance, Oliver said volatility picked up during the year, driven largely by uncertainty surrounding US President Trump’s tariff policies and his so-called “Liberation Day” tariffs.
“Trump often puts something out there, then backs down as markets rebel or deals are cut,” Oliver said, describing the pattern as “take Trump seriously but not literally” or “Trump always chickens out”.
Looking ahead, Oliver expects returns to moderate in 2026. He said the Reserve Bank of Australia is likely to leave rates on hold, the ASX is expected to return around 8 per cent, and balanced growth super funds are forecast to deliver returns closer to 7 per cent.
Australian home price growth is also expected to slow to around 5 to 7 per cent, reflecting affordability pressures, interest rates staying higher for longer and tighter macro-prudential settings.
Oliver cautioned that after strong gains over the past three years, asset valuations, particularly in US equities, remain stretched.
“Another 15 per cent plus correction is likely along the way again,” he said.
He also warned that parts of the AI investment boom are showing bubble-like characteristics, including rising data centre capital expenditure increasingly funded by debt.
Among the key lessons from 2025, Oliver pointed to the growing role of government intervention in markets, particularly under the Trump administration’s tariff agenda.
He said this trend is also evident in Australia through government efforts to support failing industrial assets, ultimately imposing costs on taxpayers and consumers.
Oliver reiterated the dangers of trying to time markets, noting that despite sharp sell-offs during the year, the broader upward trend in equities remained intact. Quoting economist John Maynard Keynes, he said “markets can remain irrational for longer than you can remain solvent”.
Despite elevated risks, Oliver said there are still reasons for cautious optimism. He expects global growth to remain just above 3 per cent, with Australian growth edging higher and corporate profit growth rebounding after several weak years.
While volatility is likely to remain high, Oliver said returns should stay positive, supported by lower interest rates, resilient economic growth and solid earnings momentum.
