Originally written by Maja Garaca Djurdjevic, 14th March 2022
Australian shares could continue outperforming US and global share markets by a reasonable margin in 2022, an expert has said.
The head of investments and capital markets at VanEck believes Australian shares could continue to outperform US and global markets as commodities and bond yields soar.
Providing commentary on big movements in share prices on the ASX on Monday, Russel Chesler said big miners and big banks are pushing the local share market upwards, helping it outperform its global peers.
“The MSCI Australia Value Index is outperforming growth shares and the Australian share market is outperforming the S&P 500 and the NASDAQ since the Russia-Ukraine war broke out in February,” Mr Chesler explained.
In response, the US Federal Reserve is expected to increase interest rates next week, for the first time since the pandemic began.“That value index includes household names such as CSL, CBA, Wesfarmers, Westpac and even Macquarie Group, stocks which have this month highlighted their resilience”.
As inflation shoots higher, Mr Chesler said this environment will be conducive to further gains by such value shares on the ASX.
“With long-term interest rates jumping higher, Australian companies that can maintain or increase their prices, and therefore margins, without turning away customers, will be the winners as inflation shoots higher,” he said.
“It is time for value companies to shine and investors who embrace their resilience are likely to see their portfolios benefit as growth shares suffer relatively more as interest rates rise.”
The yield on the 10-Year Australian Government Bond jumped to 2.41 per cent on Monday, a level last seen in December 2018, on the back of rising oil and other commodity prices, which are fuelling inflationary expectations and fears of stagflation.
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