The S&P/ASX 200 Index (ASX: XJO) is gaining in late morning trade, up 0.3%.
The ASX 200 has largely managed to shrug off concerns over the ongoing pandemic and renewed lockdowns. It's up 12.5% in 2021, a stellar 8 months by any standards.
August saw most ASX 200 companies reporting their full year (or in some cases half year) results for the 2021 financial year.
This month also saw the index hit a new record closing high of 7,628.9 points on 13 August.
While it's down 1.3% from the all-time high, the index remains up 0.4% since reporting season kicked off at the beginning of the month.
Now, with earnings season all but done and dusted, investors are wondering, what's next for ASX 200 shares?
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The experts' outlook for the ASX 200
To get an idea of what's ahead, we turn to the experts who say lockdowns are likely to impact revenue and drive up costs for some ASX 200 companies. At the same time, very few are willing to offer guidance in today's uncertain environment.
Catherine Allfrey, principal and portfolio manager at WaveStone Capital, says, "The numbers don't lie."
According to Allfrey, (quoted by the Australian Financial Review):
There's been a clear revision in the market's earnings expectations for the 2022 financial year… We've seen CEOs come out and warn the market to expect a tough first half, with many companies not operating due to lockdowns and others dealing with margin pressure due to factors such as elevated freight costs.
Shane Oliver, head of investment strategy at AMP Capital, highlighted the lack of guidance for FY22. He says, "An air of uncertainty is hanging around because even though results were solid and there were good payouts, which is normally a good sign, the outlook statements were either lacking or non-committal."
The AFR notes that Macquarie's market's forecast for earnings per share (EPS) growth in FY21 is down to 10.5% from 13% before earnings season commenced.
Morgan Stanley's chief Australian equity strategist Chris Nicol also noted many companies had not provided guidance, saying just 39% of companies had done so.
"Supply chain and cost friction was a key theme to watch going into the season," he said, noting that with more companies mentioning terms like 'headwinds', 'wages', and 'inflation', "this makes the set-up for the first half of financial year 2022 earnings more challenged".
ASX 200 companies exposed to potential increased supply chain costs could find their shares under pressure.
The upsides and downsides of FY21 reporting season
According to AMP's Oliver, 40% of the ASX reporting results "have surprised on the upside". While that's slightly below the average of 44%, he noted that only 18% "surprised on the downside which is well below the norm of 26%".
Oliver also said that 75% of companies reported increased earnings year-on-year while 88% upped or maintained their dividends.
Citing analysis from Richard Coppleson at Bell Potter, he said shareholders are looking at a record $30 billion plus in dividend payments along with more than $20 billion in buybacks.
He estimated dividend growth of roughly 57% from FY20 levels, certainly welcome news in today's low interest rate environment.
What's next for ASX 200 shares?
So what can we expect in the months ahead for ASX 200 shares?
According to Oliver:
Shares remain vulnerable to a short-term correction with possible triggers being coronavirus, the inflation scare and US taper talk, likely US tax hikes and a debt ceiling standoff and geopolitical risks. But looking through the short-term noise, the combination of improving global growth and earnings helped by more fiscal stimulus, vaccines ultimately allowing a more sustained reopening and still low interest rates augurs well for shares over the next 12 months.
The remarkable bounce back from the early pandemic lows isn't something we're likely to see repeated on the ASX 200. But if Oliver's right, the outlook remains solid.
