With the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) hovering around the 5550 mark, there is potential for significant gains for investors between now and the end of the year with some experts suggesting a return to the 6000 point mark is on the cards.
The Bear Case
The Australian sharemarket has come under considerable selling pressure in recent times as a result of Greece's debt crisis, China's sharemarket meltdown, slowing growth locally and fears of a fall in earnings across the board. Indeed, the Reserve Bank's governor, Glenn Stevens, recently admitted that slower growth locally could be the new normal which has certainly caused caution amongst investors.
Right now, there are particular concerns for the resources sector after what has been a nightmare run for the commodities market. Iron ore recently plunged to a new 10-year low, although it has managed to regain some composure since, while oil, copper, coal, gold and various other resources are enduring sharp falls.
Indeed, this has been reflected in the share prices of the miners themselves. BHP Billiton Limited (ASX: BHP), for instance, fell below $25 a share earlier today, while Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) have also come under heavy selling pressure. Elsewhere, Newcrest Mining Limited (ASX: NCM), Santos Ltd (ASX: STO), Woodside Petroleum Limited (ASX: WPL) and various other resource producers are plumbing fresh lows as well.
For the record, Morgan Stanley has forecast 1.7% negative earnings per share (EPS) growth for Australia's top listed companies for FY15, while that figure improves to 4.6% growth when the resources sector is ignored, as highlighted by the Fairfax press.
The Bull Case
Although there are concerns for the health of the market, some experts are still predicting a long-awaited return to the 6000 point mark before the end of the year, implying an upside of more than 8% from today's level.
As highlighted by Fairfax, Chris Scott, chief investment officer at Wilson Asset Management, believes there could be more upside despite being at the "mature stage of the bull market", with particular prospects laying within the retail sector. As cited by Fairfax, Scott said: "The retail sector could also surprise on the upside thanks to low interest rates, low unemployment and a hot property market that just might make people feel wealthy and spend more."
In reality, any companies exposed to the housing construction industry could be in for a boost given the red-hot nature of the local property market recently. That could potentially include companies such as JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN), which both sell white goods, as well as Wesfarmers Ltd (ASX: WES) (which owns Bunnings).
In addition, a weaker Australian dollar should also help bolster the earnings of companies with international exposure (particularly to the US market) such as Westfield Corp Ltd (ASX: WFD) and Amcor Limited (ASX: AMC), at least partially offsetting the impact of slower domestic growth. The dollar is currently worth 72.93 US cents although some experts believe it could fall below 60 US cents in the not-too-distant future.
Indeed, there are no guarantees when it comes to investing but with the ASX 200 hovering around 5550 points, there are certainly some great opportunities presenting themselves right now.
