Shane Oliver, Head of Investment Strategy and Chief Economist.
The following note looks at the recent correction.
The key points are as follow:
- The US share market is long overdue a decent correction. This now appears to be unfolding and may have further to go as higher inflation, a slightly more aggressive Fed and higher bond yields are factored in.
- This will impact most share markets including Australian shares.
- However, in the absence of an aggressive 1994 style back-up in bond yields or a US recession – neither of which we expect - the pull back in shares should be limited in depth and duration to a correction (with say a 10% or so fall) and shares should have positive returns this year as a whole.
- However, it’s likely to be a more volatile year than last year.