Australian shares reached a 2016 high on Friday thanks to global shares reversing their downward trend, says AMP Capital.
In a note to investors, AMP’s head of investment strategy and chief economist Shane Oliver said last week saw investors adopt a “risk on” approach following positive economic data out of the US and China.
Mr Oliver said the recent weakening of bond yields has helped to “improve the relative attractiveness of shares”, adding that “US shares have broken out to a new record high” and European shares have recouped much of their Brexit losses.
“Ultra-low bond yields, with one third of the global bond index in negative yield territory, point to a soft medium-term return potential from them, but it’s hard to get too bearish in a world of fragile growth, spare capacity, low inflation and ongoing shocks,” he said.
The ongoing shock from the Brexit vote, coupled with Italian bank-related risk, could result in more volatility in the share market “in the short term”, but Mr Oliver said the next year was likely to be positive.
“We anticipate shares trending higher over the next 12 months helped by okay valuations, very easy global monetary conditions and continuing moderate global economic growth.”