Expert forecast: Here's where UBS says the ASX 200 will finish the year

UBS does not expect the Australian economy to slip into a recession.

Bernd Struben

Author bio Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel. Areas of expertise Australian and global share markets Macroeconomic and geopolitical trends Real estate Education Economics, University of Michigan Favorite investment quote "The four most dangerous words in investing are: 'This time it's different." — Sir John Templeton

Published October 14, 2022 1:46 pm AEDT

The S&P/ASX 200 Index (ASX: XJO) is soaring on Friday, up 1.8% in early afternoon trade to 6,760 points.

The strong run higher on the ASX 200 today follows in the footsteps of the US market. The S&P 500 Index (SP: .INX) finished yesterday (overnight Aussie time) up 2.6%.

This came despite a hot US September inflation print, as bearishly positioned options traders, caught on the wrong side of the trend, scrambled to cover their short positions.

That's today's price action.

So, what can ASX 200 investors expect by the end of 2022?

A woman looks quizzical as she looks at a graph of the share market. — Image source: Getty Images

Here's where UBS says the ASX 200 will finish the year

Despite today's sizeable gains, the ASX 200 remains down 10.9% so far in 2022.

But in potentially good news for investors, broker UBS believes the worst of the sell-off is over. UBS analysts believe the benchmark index will end the year higher from here, with an Aussie recession looking unlikely.

According to UBS equity strategist, Richard Schellbach (quoted by The Australian):

Domestic cyclicals have been notable underperformers, with sectors exposed to the local consumer or housing down about 30% year to date. Given we do not expect a recession to play out in Australia, these moves seem overly pessimistic, and present an opportunity to buy into some high quality businesses with solid medium-term prospects.

Schellbach pointed to strong demand for the products produced by ASX 200 and smaller listed companies as likely to support the market in the months ahead.

"Despite gloomy press headlines, and continued challenges from supply chain constraints, input cost pressures, and more recently labour market shortages, the reality is that the end-demand which ASX business are seeing is firm," he said.

UBS has a year-end target of 7,000 points for the ASX 200. That implies a lift of 3.5% from the current level.

Of course, not all stocks are created equal. Should the benchmark gain 3.5% by the end of 2022, some shares will see a much larger lift while some will see their share prices slide.

Happy investing!

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