AMP economist tips ASX to hit 6300

Dr Shane Oliver, the Chief Economist at AMP Limited (ASX: AMP), is expecting the ASX 200 to reach 6300 this year.

As the ASX 200 kicks off the week at 6050, Dr Oliver’s forecast represents an increase of about 4.1 per cent.

He also believes the current conditions indicate that we’re still in a “sweet spot” for investors.

“A further rise in global growth to around 3.9 per cent, driving solid earnings growth with continuing low inflation and easy global monetary conditions should keep investment returns favourable,” Dr Oliver said.

While Dr Oliver’s forecast is significantly below that of analysts from Macquarie Group Ltd (ASX: MQG), who have indicated that the ASX 200 will hit 6500 points in 2018, it is certainly more optimistic than Morgan Stanley’s offering whose analysts have tipped the ASX 200 to sink to 5800 by the year’s end.

But Dr Oliver’s forecast appears more favourable for the wider market.

“Australian shares are likely to do okay but underperform global shares with returns around 8 per cent with moderate earnings growth,” Dr Oliver stated.

Dr Oliver also stated that, despite expectations of more volatility through the year, “global shares are likely to trend higher through 2018 on the back of rising earnings and still easy monetary conditions”.

“Commodity prices are likely to push up with global growth”.

AMP’s Chief Economist is not alone on his outlook for commodity prices, with UBS previously voicing a similar view.

“We retain our overweight in resources, in part due to an expectation of solid global growth supporting commodity prices, but also because of relatively undemanding valuations and the ability of the resource sector to act as a hedge against rising inflation and interest rates,”  according to UBS.

The positive outlook for commodity prices has been reflected in the market with the share prices of miners Rio Tinto Limited (ASX: RIO), BHP Billiton Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) all heading up recently.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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