The last couple of years of high inflation and interest rate hikes have done ASX shares no favours, especially at the small-cap end of the market.
However, investors are constantly told share markets are forward-looking.
That's why perhaps the ASX is now looking past inflation and interest rate rises.
So what's the big macroeconomic trend that will drive ASX shares up or down from this point on?
The new catnip for Australia's economy
The Australian economy will recover using "several tailwinds", but for Datt Capital chief investment officer Emanuel Datt there is no doubt what will be the biggest driver.
"Immigration inflows over the next two years are expected to exceed 700,000 individuals who will require essential services and employment," he said.
"We expect this will stimulate the economy."
While Australia has accepted high levels of immigration over the decades, this stimulant completely dried up for more than three years during the COVID-19 pandemic.
Now that the federal government is triggering a resurgence, its effects on the nation will be profound.
"The potential economic benefits are high. Migration is central to Australia's future prosperity," said Datt.
"Australia's projected population will be 38 million by 2050, and migration will be contributing $1.6 trillion to Australia's GDP, according to the Australian Migration Council."
All those additional consumers will trigger several benefits, according to Datt.
"It has a profound positive impact not just on population growth, but also on labour participation and employment, on wages and incomes, on our national skills base and on net productivity."
Which ASX shares will benefit?
So how would that help ASX companies?
"Data shows that… migrants contribute disproportionately to new business formation, innovation, and job creation," said Datt.
"Today, with the economy at full employment, exposing skills gaps, companies are calling for a higher number of permanent migrants."
And through these jobs and enterprises, the migrants will spend big to support their new lifestyle.
"New immigrants expect a similar quality of life to the average Australian and accordingly increase their consumption habits over time," said Datt.
"In addition, new immigrants are generally younger than the average Australian, thereby improving the overall demographic composition of society."
Datt forecasts that ASX shares in certain industries will do better than others.
"In this scenario, sectors like education, housing, retail and healthcare will benefit from more consumption patterns shown by new immigrants," he said.
"We will be watching closely the small cap sector to [weigh] which companies are positioned to beat inflationary pressures and to undertake these new growth opportunities."
