The combination of decent global growth, low inflation and 'easy' monetary policy augers well for growth assets going into the new year, says AMP Capital.
Shares are likely to see their traditional 'Santa Claus' rally over the Christmas/New Year period, according to AMP Capital chief economist Shane Oliver.
Improved valuations, easy monetary conditions and the drying up of new issuance will contribute to the strength of stockmarkets towards year end, Mr Oliver said.
"However, worries about the Fed and a rising $US possibly weighing on commodity prices and emerging countries may mean that volatility will remain high," he said.
Looking ahead to 2016 more broadly, conditions are favourable for growth assets in general, Mr Oliver said.
Global shares are likely to trend higher helped by relatively high valuations compared to bonds, he added.
"For shares we favour Europe (which is still unambiguously cheap and seeing continued monetary easing), Japan (which will see continued monetary easing) and China (which will also see more monetary easing) over the US," Mr Oliver said.
"Australian shares are likely to improve as the drag from slumping resources profits abates, interest rates remain low and growth rebalances away from resources," he said.
"But they will probably continue to lag global shares as the commodity price headwind remains.
"Expect the ASX 200 to rise to around 5,700 by end 2016," Mr Oliver said.
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