AMP Capital chief economist Shane Oliver has given his take on the ASX falling to a two-year low this week.
“While global and Australian shares had a nice bounce from their late October lows – rallying about 5 per cent, partly reversing their 10 per cent or so top to bottom fall, they have since fallen back to their lows as the worries about US rates, bond yields, trade, tech stocks, etc, have morphed into broader concerns about global growth and profits,” Mr Oliver said.
Fears of a credit crunch and falling home prices are probably not helping Australian shares either, the leading forecaster noted. This week Aussie equities fell below their October low. Mr Oliver believes it is too early to say whether the ASX has hit rock bottom.
“But we remain of the view that it’s not the start of major bear market,” he said.
Short of some unforeseeable external shock, the economist believes that a US, global or Australian recession is not imminent, for a number of reasons.
In relation to the US, business and consumer confidence are very high, Mr Oliver noted.
“While US monetary conditions have tightened, they are not tight and they are still very easy globally and in Australia (with monetary tightening still a fair way off in Europe, Japan and Australia). We are a long way from the sort of monetary tightening that leads into recession,” he said, adding that fiscal stimulus is continuing to boost US growth.
Mr Oliver also observed that he has not seen the excesses – in terms of debt growth, overinvestment, capacity constraints and inflation – that normally precede recessions in the US, globally or Australia.