Seemingly there is an uneasy truce at this moment, with the recovery of the bank shares well to the pre-Royal Commission levels. Where exactly, is the profit growth going to come from to justify all the optimism?
The biggest anonymity is the Australian economy.
The Reserve Bank of Australia is concerned, somewhat because of the economy and partly by the lack of action by the Federal government. There is a need for government to take a step, but its seem that government is careful to say that further interest rate cuts may have limited impact.
I would not bet on the interest rates dropping further and if they do, that will reveal more about the lack of political action than about the view of interest rate policy of RBA.
3 of the top performing ASX stocks last year: Afterpay, Nearmap, and Appen, more than doubled, and a biotech firm, Clinuvel, was also amongst the top five performers.
These firms & their tech members either are very expensive or are really onto the next big thing. Maybe both.
That does not mean that they will essentially crash back to earth but the odds against further huge share price gains are increasing.
On the other side, the market hated energy stocks & consumer last year. If the rate of RBA cuts work & house prices stabilize, they might just be the bargains of the coming financial year.
Coming on to the property, the worst of the property price slides in Melbourne and Sydney appear to be over.
However, after a few huge falls over the last 18 months, I think you would be daring to believe that rather than a meaningful pause there is more of the same to come.
What about the Australian dollar? A less aggressive United States Federal Reserve has perhaps limited the “damage” for a while.