Analysts at wealth management group Morgan Stanley have given a bearish outlook for the Australian share market with the group predicting the benchmark index will be sitting at just 5,350 points this time next year.
Given that the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has risen 1.2% today to be sitting at 5,370, that would indicate a negative 0.4% return over the coming 12 months.
According to Fairfax media, Morgan Stanley believes our local gross domestic product (GDP) will grow by just 1.9% in 2015, which compares to the consensus estimate of around 2.9%. This will be the result of stagnant growth from Australia's largest companies, diminished economic confidence since the middle of this year and a rising level of unemployment, tipped to approach the 7% mark.
While the group believes that the big four banks, real estate and capital goods stocks could be amongst the biggest weights on the economy, they also highlighted companies such as Insurance Australia Group Ltd (ASX: IAG) and Sonic Healthcare Limited (ASX: SHL) which could buck the trend.
Should you be worried?
In case you hadn't noticed, various investors and analysts have been bearish on the stock market for years – ever since the economy began its recovery since the Global Financial Crisis. In that time, the ASX 200 Index has risen more than 70%, and that's before dividends are even taken into consideration.
While the market could certainly experience a mediocre year, investors shouldn't let these bearish forecasts impact their investment decisions. As the old joke goes, 'economists have predicted nine of the last five recessions.'
Of course, it is always wise to keep some cash on the sidelines just in case the market does take a turn for the worse, but 2015 could just as likely see the ASX 200 climb much higher – particularly if the Reserve Bank does reduce interest rates even further. Considering unemployment is tipped to continue rising, it's certainly a possibility.
Should that happen, it's likely that investors will continue to flock towards some of the market's high-yielding stocks. While I wouldn't suggest investors look at companies like the banks – none of which are cheap right now – they could certainly take a look at other dividend payers such as Coca-Cola Amatil Ltd (ASX: CCL).
