Aussie equities lagging global markets, SMSFs warned
The Australian equity market may continue to fall behind its global peers given the rising regulatory risk and slowing credit growth for the financial sector, an economist cautions.
BetaShares chief economist David Bassanese said while global markets have retreated in recent months and are struggling to regain past peak levels, it is “not the start of the long feared equity bear market”.
Economic growth indicators across much of the world remain strong, he said, which is a positive sign.
“Although it softened a little earlier this year, the JP Morgan-Markit Global Composite Index edged higher in April, and still remains at fairly healthy levels. While European and Japanese growth have slowed somewhat so far in 2018, this is coming off the back of what seemed unsustainably strong growth in late 2017. Meanwhile, US economic growth has remained firm, with consumer spending especially picking up in recent months after a slow start to the year,” he explained.
Europe and Japan may have greater potential for growth than the US, he said, and their central banks are likely to retain expansionary monetary policies for longer.
“As for Australia, the overall market may well continue to lag global peers given the rising regulatory risk and slowing credit growth now facing our all-important financial sector,” he warned.
Resource stocks in Australia, he added, remain at the mercy of iron-ore prices, which appear to be trending gradually downward as China moves to wind back excess steel-production.
“Interestingly, outside of the top-20 stocks in the market, the smaller to mid-cap parts of the market, have been posting reasonable performance,” he said.
“Given rising tourism, strong growth in construction and health-related services, it may pay Australian investors to seek growth opportunities in this more dynamic part of the market.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.