AMP Chief economist Shane Oliver is of the view that shares will do ok on a 12 month view given central banks are likely to be near the top of interest rate rises. He does foresee some unknowns in the next few months that are likely to lead to volatility.
Coming into 2023, it was widely expected that equity prices would decline in the first half or 2023 as corporate earnings contracted from the effect of increased interest rates. After this contraction it was expected that interest rates would be lowered and an economic recovery would follow.
So far in 2023 economic and corporate data has mostly been better than expected and this has helped financial markets this year. Market expectations have remained fluid ranging from a hard landing recession, to a soft landing and resilience.
Currently the issue of raising the debt ceiling in the US is a source of concern for markets. Failure to agree on an increase would have serious issues with the US defaulting on debt.
With inflation in most countries starting to decline from the highs of 2022, it is possible that interest rates have peaked., the risk of a severe recession has declined and it is possible 2024 may present a recovery for equity markets.
May 2023
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