The S&P/ASX 200 Index (ASX: XJO) share market could have a very eventful year in 2024. Some experts have given their views on what might happen next.
Remember, a share market return is made up of all of the individual companies' returns. Individual ASX shares can perform very differently to how the overall market does.
Positive returns expected
According to reporting by The Australian, the broker UBS thinks that the ASX 200 could rise to 7,600 points, which may suggest that it could rise 5.6% by the end of 2024. If including the dividends, that could add a few more percentage points of a return.
UBS analyst Richard Schellbach has been surprised at how ASX 200 shares have been able to maintain profit margins in an inflationary environment. Schellbach suggests low unemployment will help demand, but he predicts companies will find it harder to pass on price rises.
The UBS analyst suggests earnings growth expectations are very low, which is supposedly "one of the more bullish signs" for ASX 200 shares.
Earnings growth in FY23 was 0% and profit is expected to fall 6% in FY24, according to the consensus estimates. Though UBS' earnings estimate is for another year of flat earnings.
While there are headwinds in the first six months of 2024, UBS suggests there will be more positivity about the wider economic picture, which could push ASX 200 share valuations higher.
AMP Ltd (ASX: AMP) also thinks the ASX 200 share market will deliver a positive return, with capital growth of around 4%. AMP thinks the Reserve Bank of Australia (RBA) is going to cut its rate from 4.35% to 3.6%.
However, AMP also fears the first half of 2024 could be "rough" as growth slows and perhaps goes negative, and valuations are not as attractive as the start of 2023.
But, ASX 200 shares could benefit as growth strengthens later in 2024 and into 2025. Dr Shane Oliver points out ASX 200 shares have underperformed global shares, and the Australian stock market could outperform next year. However, he adds that a local recession could threaten that.
According to The Australian, Oliver thinks unlisted commercial property returns are going to be negative because of higher interest rates and Australian home prices are "likely to fall" as high interest rates hit demand and unemployment rises.
Could history be a useful indicator for ASX 200 shares?
The UBS analyst Schellbach pointed out that this situation of growth being challenged and surrounded by worries has "eerie similarities" to what global shares faced in the 1990s, according to reporting by The Australian. Schellbach said:
In 1994 the RBA hiked aggressively through the second half of the year which caused equities to de-rate sharply, but equity fears over a hard landing proved wrong.
Not only did the economy avoid a recession, but Aussie stocks managed to post positive annual returns for the following seven consecutive years 1995 to 2001.
