What would more stimulus mean for ASX 200 shares?

ASX 200 shares like Afterpay Ltd (ASX: APT) have surged in 2020 but what would more stimulus mean for share prices next year?

Ken Hall

Ken is a big believer in the power of dividends in building a strong financial future. He has a keen interest in economics and the power of markets in driving change in the world. In his spare time he loves to meet new people, watch sports and help others build their best financial future!

Published December 15, 2020 11:10 am AEDT

With a very strong quarter almost under its belt, the S&P/ASX 200 Index (ASX: XJO) appears to be flying home towards Christmas.

Just yesterday we saw the likes of Afterpay Ltd (ASX: APT), Wesfarmers Ltd (ASX: WES) and Xero Limited (ASX: XRO) hit new record highs.

But according to at least one major bank, more government stimulus could be on the way in the next few years. What would that mean for Aussie investors and their favourite ASX 200 shares?

Super profit tax ASX miners one hundred dollar notes floating around representing asx share price growth — Image source: Getty Images

What more stimulus could mean for ASX 200 shares

According to an article in the Australian Financial Review (AFR), Westpac Banking Corp (ASX: WBC) chief economist Bill Evans thinks there could be more stimulus ahead.

Westpac expects the Reserve Bank to spend $300 billion over the remainder of 2020, as well as throughout 2021 and 2022, via large-scale bond purchases.

That means more money flowing around the economy that needs to find a home. Economists are also holding out for the Mid-Year Economic and Fiscal Outlook on Thursday for further evidence of a strong economic recovery.

Surging iron ore prices and optimism regarding COVID-19 vaccine rollouts have propelled ASX 200 shares to one of their best quarters in the last two decades.

In fact, the benchmark index is up more than 14% since the end of September thanks to strong share price gains from the likes of Afterpay and Wesfarmers.

What do fundies think of the proposed stimulus?

Chief investment officer at Vertium Asset Management Jason Teh was quoted as saying "momentum is strong".

Mr Teh noted the strong performance from the banks in recent months but is not looking to buy in right now.

However, according to the AFR, Macquarie Group Ltd (ASX: MQG) equity strategists are reportedly reducing exposure to stocks that benefit from low yields such as gold and growth shares.

Foolish takeaway

ASX 200 shares like Afterpay have been propelled higher in 2020 but, if these stimulus reports are anything to go by, it seems there is still plenty for investors to be optimistic about as we head into the new year.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.