The Aussie sharemarket experienced significant volatility in 2020. What can we expect in 2021 and which sectors are likely to shine?
There’s no denying that 2020 was an interesting year, thanks to the pandemic, and the Aussie sharemarket certainly felt it. The ASX 200 plunged to 4,402.50 on 23 March after hitting a high of 7197.20 on 20 February. And Australia entered its first recession in almost 30 years.
Despite the volatility, 2020 turned out far better for investors than was feared, said Dr Shane Oliver from AMP Capital. So what is the outlook for the year ahead? Dr Oliver is cautiously optimistic.
“2021 is likely to see a few rough patches along the way (much like we saw in 2010 after the recovery from the GFC), but looking through the inevitable short term noise, the combination of improving global growth and low interest rates augurs well for growth assets generally in 2021,” said Dr Oliver.
“Australian shares are also likely to be relative outperformers returning around 12% helped by better virus control, enabling a stronger recovery in the near term, stronger stimulus, sectors like resources, industrials and financials benefitting from the rebound in growth and as investors continue to drive a search for yield benefitting the sharemarket as dividends are increased.”
Portfolio manager of the Fidelity Australian Equities Fund, Paul Taylor, is also optimistic. While significant uncertainty is likely to continue in the short term and will likely cause some ongoing volatility, we firmly believe that when we look back to this period in five years’ time, we will view it as an excellent time to have invested in the market, he said.
Mr Taylor added that Australia and the world are simultaneously undertaking monetary and fiscal policy expansion, and once we enter a post-COVID-19 recovery phase, it will likely be a positive for Australian and global equity markets alike.
“Even if interest rates initially rise on the back of this expansionary phase, equity markets tend to perform well in the early phases of interest rate rises. That said, interest rate rises are still probably a year or two away, as we navigate the demand destruction resulting from COVID-19 measures,” he said.
Russell Investments expects to see a rotation towards more cyclical parts of the market that are cheap, at the expense of the more expensive growth parts of the market. “In this scenario, we would expect to see banks and REITs outperform at the expense of more defensive consumer and healthcare stocks which have benefitted from the COVID-19 dynamic through 2020,” said Russell Investments.
The team at InvestSMART thinks mining and energy is a sector that might outperform this year. “Years of underinvestment and high dividend payments by miners have left the supply side looking weak. Miners still look attractive and are better managed than in the past,” InvestSMART’s deputy head of research, Gaurav Sodhi, told Canstar. He offered the examples of South32, Alumina and Woodside Petroleum.
Old world industrials are also worth a look, according to Mr Sodhi. “Everyone is looking for the next hot thing and high quality, steadier businesses are being ignored as investors chase the next Afterpay,” he said, naming United Malt Group, Telstra and Omni Bridgeway as companies that fit that description.
Cover image source: Pavel Ignatov (Shutterstock)
Try our Online Share Trading comparison tool to instantly compare Canstar expert rated options.
This advice is general and has not taken into account your objectives, financial situation, or needs. It is not personal advice. Consider whether this advice is right for you, having regard to your own objectives, financial situation and needs. You may need financial advice from a suitably qualified adviser. For more information, read Canstar’s Financial Services and Credit Guide (FSCG) and our detailed disclosure. Canstar may receive a fee for referring you to a product provider – for further information, see how we get paid. Payment of fees for ads does not influence our Star Ratings or Awards.
Canstar is a comparison website, not a product issuer, so it’s important to check any product information directly with the provider. Consider the Product Disclosure Statement (PDS), Target Market Determination (TMD) and other applicable product documentation before making a decision to purchase, acquire, invest in or apply for a financial or credit product. Contact the product issuer directly for a copy of the PDS, TMD and other documentation.
Canstar is an information provider and in giving you product information Canstar is not making any suggestion or recommendation about a particular credit product or loan. If you decide to apply for a credit product or loan, you will deal directly with a credit provider, and not with Canstar. Rates and product information should be confirmed with the relevant credit provider. For more information, read the credit provider’s key facts sheet and other applicable loan documentation for that product. Read the Comparison Rate Warning.
All information about performance returns is historical. Past performance should not be relied upon as an indicator of future performance; unit prices and the value of your investment may fall or rise.
Canstar is an information provider and in giving you product information Canstar is not making any suggestion or recommendation about a particular product. The information has been prepared without taking into account your individual investment objectives, financial circumstances or needs. Before you decide whether or not to acquire a particular financial product you should assess whether it is appropriate for you in the light of your own personal circumstances, having regard to your own objectives, financial situation and needs. You may wish to obtain financial advice from a suitably qualified adviser before making any decision to acquire a financial product. Please refer to the product disclosure statement (PDS) and Canstar’s Financial Services and Credit Guide (FSCG) for more information, and read our detailed disclosure, important notes and liability disclaimer.
The views, opinions, and positions expressed in this piece are the views of the author(s) alone, and do not necessarily reflect the views of Canstar.
The Star Ratings in this table were awarded in May, 2022 and data is as at that date, updated from time to time to reflect product changes notified to us by product issuers. The search results do not include all providers and may not compare all features relevant to you. View the Canstar Online Share Trading Award & Star Rating Methodology. The rating shown is only one factor to take into account when considering products.
Canstar is an information provider and in giving you product information Canstar is not making any suggestion or recommendation about a particular product. The information has been prepared without taking into account your individual investment objectives, financial circumstances or needs. Before you decide whether or not to acquire a particular financial product you should assess whether it is appropriate for you in the light of your own personal circumstances, having regard to your own objectives, financial situation and needs. You may wish to obtain financial advice from a suitably qualified adviser before making any decision to acquire a financial product. Please refer to the product disclosure statement (PDS), Canstar’s Financial Services and Credit Guide (FSCG) for more information, and read our detailed disclosure, important notes and liability disclaimer.
Canstar may earn a fee for referrals from its website tables, and from Sponsorship or Promotion of certain products. Fees payable by product providers for referrals and Sponsorship or Promotion may vary between providers, website position, and revenue model. Sponsorship or Promotion fees may be higher than referral fees. Sponsored or Promotion products are clearly disclosed as such on website pages. They may appear in a number of areas of the website such as in comparison tables, on hub pages and in articles. Sponsored or Promotion products may be displayed in a fixed position in a table, regardless of the product's rating, price or other attributes. The table position of a Sponsored or Promoted product does not indicate any ranking or rating by Canstar. For more information please see How We Get Paid.
Any advice provided on this website is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you. Consider the Product Disclosure Statement and Target Market Determination before making a purchase decision. Canstar provides an information service. It is not a credit provider, and in giving you information about credit products Canstar is not making any suggestion or recommendation to you about a particular credit product. Research provided by Canstar Research AFSL and Australian Credit Licence No. 437917. You must not reproduce, transmit, disseminate, sell, or publish information on this website without prior written permission from Canstar.