The Australian market is likely to reach a new record in the early months of the year, with a win on the health front likely to offset geopolitical issues, an analyst has stated.
The All Ordinaries lost 48.40 points on Monday, falling by 0.69 per cent to 6,938.40, while the ASX 200 also experienced losses, falling by 0.78 per cent to 6,663.00 points.
But, despite a slow start to the week, Wealth Within’s chief analyst, Dale Gillham, believes the Australian stock market is set to rally in early 2021, beating its previous record of 7,230 points set on 21 February 2020.
“The Australian market is strong. We have handled COVID relatively well and are getting back to work,” he said.
“Right now we are only 4 per cent away from breaking the previous all-time high set in February 2020, and overall we are seeing confidence in our market,” Mr Gillham told nestegg.
While noting that overall the Australian market is likely to benefit from strong gains, Mr Gillham predicted that sectors that underperformed in 2020 will likely be the big winners this year.
“Energy was the worst performer in 2020, with materials also subdued. Technology was by far the best sector in 2020.
“Statistics constantly prove the best performers in one year are rarely the best in the next as fund managers practice sector rotation looking for growth,” Mr Gillham said.
The analyst also predicted that the financial sector could overcome a low interest rate environment and outperform in 2021.
“I also like financials, more so the banks, as they have generally been down for over five years, while they may not break land speed records this year, I think the banks will perform much better than they have in past years.”
“Given the size of that sector in our market, if they are rising and materials are also rising, then our market will have a good year,” he explained.
Moreover, Mr Gillham pointed out that sectors that outperformed in 2020 could be sold off in 2021.
“I see profit-taking in technology stocks, and the money has to go somewhere else, with energy looking very good along with materials,” Mr Gillham said.
The chief analyst also believes that unlike overseas markets, Australia’s rally has been subdued, which could mean 2021 is a stronger year for investors.
“If you are asking about the Australian market, we are still roughly where we were this time last year, and so we are not in any overheated type of situation,” Mr Gillham said.
“For the calendar year, our market only rose 0.5 per cent, and it was really only the strong rise in November that pushed the market to a point where it could trade in positive territory. Up until November, our market was still down 5 to 6 per cent.”
While highlighting that it is an educated guess, Mr Gillham said Australia’s market could be up double digits in 2021.
“I think our market will achieve double-digit growth this year. How big the number will be really depends on the COVID situation, China and a few other factors. My guess is somewhere around 10 per cent,” he concluded.
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Article reproduced from nestegg.com.au