S&P/ASX 200 Index (ASX: XJO) shares are lower today, but James Gerrish from Shaw and Partners says the "war fear" is now fading.
ASX 200 shares rallied 1.76% to close at 8,671.8 points yesterday after US President Donald Trump suggested they could be out of Iran within two or three weeks.
This boosted investors' confidence in the global economic outlook, with European and US markets also responding positively overnight.
ASX 200 shares were initially higher today, rising to 8,723.3 points before retracing to 8,594.8 points, down 0.9%, at the time of writing.
While the ASX 200 is still volatile, Gerrish said the market is preparing for a rally.
After a steep 9.1% drop between 27 February and 23 March, the ASX 200 reversed its trajectory last Tuesday and has since gained 2.7%.
In this Market Matters newsletter today, Gerrish said:
With hostilities potentially nearing an end, investors rotated aggressively into cyclicals, particularly resources.
While it's no surprise the market staged an aggressive relief rally with an end to the conflict now in sight, the key question is what comes next, with the ASX200 still ~6% below its March high.
Gerrish cautioned that "we're not out of the woods yet".
He said if ASX 200 shares were to fall below 8,550 points again in the coming days and weeks, a re-test of the 8,200 trough was "likely".
The ASX 200 fell to a 10-month low of 8,262.4 points last Monday.
Gerrish and his team remain bullish on ASX shares for 2026 because of the strong February earnings season and stable credit markets.
He said:
The markets' performance over the next 24 hours will give us a big clue as to the strength in equities, if they're strong into Easter, the bulls could be in control.
Gerrish and his Market Matters team are bullish on ASX 200 shares for the rest of 2026.
Today, they named two ASX 200 shares that they expect to "ride the rebound".
These companies both reported well in February, initially sending their share prices higher, before the Iran war dragged them back down.
Gerrish said this was "potentially affording an opportunity to buy high-performing stocks at a cheaper entry".
Here are those ASX 200 share picks.
Image source: Getty Images
Commonwealth Bank of Australia (ASX: CBA)
The CBA share price is $172.33, up 0.25% on Thursday.
The ASX 200 financial share has fallen 0.66% over the past month.
Gerrish and his team like CBA shares at today's price, and predict a 10% rally ahead to about $190 apiece.
He said:
If we are correct and the ASX is going to test/make new highs in 2026, a call many find it hard to imagine, CBA will likely come along for the ride.
Australia's largest bank delivered a strong 1H result in February which saw the stock surge ~12% in 2-days, a huge move for such a stock let alone bank of its size.
CBA beat consensus on cash profit and lifted the interim dividend, with volume growth and improving credit quality offsetting margin pressure and higher costs.
The stock's "drift" lower in March demonstrates that investors are hesitant to reduce their position in the bank, even during a war.
Ramsay Health Care Ltd (ASX: RHC)
The Ramsay Health Care share price is $39.01, down 0.15% today.
This ASX 200 healthcare share has fallen 9.5% over the past month, after reaching an 18-month high of $44.73 in early March.
The Market Matters team is "cautiously bullish" on Ramsay Health Care shares at today's price.
Gerrish said:
RHC surged ~10% after the private hospital operator delivered a better than expected 1H result in February.
We liked the comments from Chief executive Natalie Davis saying the turnaround strategy for Australia's largest private hospital operator is gaining traction, pointing to improved admissions, better utilisation of operating theatres, increased market share, and growth in both revenue and margins.
Ramsay's domestic performance likely marks an inflection point after years of post-pandemic stagnation, with early margin improvement signalling that management's operational focus is beginning to drive earnings momentum despite ongoing challenges.
The stock has rallied 30% from its 2025 low and we still see reasonable value in this turnaround story, although it's unlikely to enjoy the same tailwind from a broader "risk-on" rally as some other areas of the market.
