Once again it is time to dust off the crystal ball, stick a finger in the air and toss some chicken bones over my shoulder in a vain attempt to forecast what the Australian stock market will do in 2013. Last year the ASX All Ordinaries and S&P/ASX 200 posted respectable gains, but will they do so again this year?
Let’s start off with reviewing my call for 2012 which was outlined in Australian stock market outlook & forecast for 2012 which was posted in January of that year.
In a nutshell, I expected the All Ords/ASX 200 to end 2012 somewhere between 4800-5200 and although stocks did post a solid rally from the middle of the year, both finished below the 4700 level. So I got the direction right (up) but…I was too bullish. Perhaps I can give myself 5 out of 10?
However my anticipation that the housing market and consumer spending would be weak did prove to be correct so I am relatively pleased that at least I was able to spot some trends.
This year I don’t expect the stock market to surge upwards despite the help it will get from lower interest rates and stimulus spending in China & Japan. The Baltic Dry Index is still in a slump, oil & gas prices don’t suggest a global economic recovery has taken hold and prices for commodities like iron ore will remain subdued.
Also it appears much the official economic data we see coming out of China has been “adjusted” for public consumption so I reckon it is prudent to be prepared for some nasty shocks during the year. In addition the Eurozone is basically in a recession, the U.S. economy isn’t doing much better plus emerging economies like India and Brazil may find the going a bit rough in 2013.
So I am less bullish about the Australian stock market now at the start of 2013 than I was at the start of 2012 despite the lift it should get if (when?) there is a change of government. However I still feel the market is trading lower than it should be so I expect it to finish the year in a range of between 4800-5200 – which is a range I have been focused on for a few years now.
This means I am forecasting that the ASX All Ordinaries and S&P/ASX 200 will rise less in percentage terms in 2013 than they did in 2012 or in more specific terms, finish the year around 8-10% higher. Not a bad annual return, but let’s not forget the Australian stock market is still way below the pre GFC high when the All Ords/ASX 200 both peaked above 6500! Ah..those were the days my friends!
So in short, although I still have concerns about the global economy and believe the Australian economy will struggle this year I still expect the stock market to rise mainly because the market overall, still looks a touch oversold to me from a long term perspective.
The sky is not falling in, the global economy is not imploding and we can still use paper money, but the hangover from the GFC is still with us and it’s going to take some more time for the markets to adjust and heal.
In regards to the wider Australian economy I expect the housing market to remain weak in 2013, the RBA to cut rates at least one more time and consumer spending to remain subdued.
As for gold – well I don’t reckon it will break through $2000 USD this year and I still believe it’s at bubble-level prices. Getting into gold before the GFC would have been a great move, getting into gold now to me seems like asking for trouble. I’m sure some smart and lucky traders will make plenty of money from gold, but I don’t want to be caught in the rush for the exit when the mass selling begins.
My stock market investment strategy for this year will be much the same as it was last year. I will focus on what I think are undervalued blue-chip stocks and stay clear of riskier shares including smaller companies for now.
Finally please remember that making a forecast is essentially a planning exercise and that my aim at this stage is to simply try and spot the trends rather than predict precisely where the market will finish at the end of the year.
Well that’s it for me..now over to you for your forecasts and predictions for 2013!
Greg Atkinson is the editor of Shareswatch Australia and the Managing Director of Ohori Capital He is originally from Australia but currently resides in Japan. He can be followed on twitter via @GregAtkinson_jp