Shares surge, worries subside

‘The Middle East is of some concern but sanity should prevail’

Ausbil’s Paul Xiradis

WORRIES that have loomed over investors in recent years are showing signs of receding as sharemarkets surge to fresh record highs.

Investment specialists say the list of negative factors facing shareholders has shrunk, and some believe a bigger concern now is that investor euphoria leads to a boom-bust situation for stocks.

Ausbil Investment Management executive chairman Paul Xiradis, who has forecast total sharemarket returns of 8-10 per cent this year, said there were fewer concerns now than in 2019.

US-China trade war fears had eased and Brexit uncertainty was largely resolved by the British election, he said.

“The real risk over the next 12 months is geopolitical,” Mr Xiradis said. “The Middle East is of some concern but sanity should prevail.”

Midsec adviser David Middleton said his firm believed asset prices would be higher in five years’ time but “everything is expensive” now.

“We can’t see a return to normal settings without there being some pain involved,” Mr Middleton said.

“Our solution is to establish a 10 per cent term deposit holding above what you would normally carry to take advantage of opportunities when setbacks come along.

“The fact that people aren’t worrying is more problematic – that could lead to euphoria.”

And euphoric investors could keep pushing share prices higher, Mr Middleton said.

“In 1987 it went up by 40 per cent between January and October then came down again,” he said. “The uncertainty today is not about China, Brexit or Trump – the concern is everything is expensive at the moment.”

Natixis Investment Managers Solutions head of global market strategy Esty Dwek said the top risks for 2020 included an oil price spike, tech stock sell-off, Middle East tensions, the US-China trade truce breaking down, and the US election.

Ms Dwek said despite this, sharemarkets should rise again.

“Higher volatility should persist,” she said.