Company Interview / Shane's View: Strap in for a volatile ride

SThe Australian share market made it back to its record high only to fall back – what’s the outlook?  Despite lots of volatility the Australian share market has had a good start to the year (up 2.4%) and is outperforming the US (which is down 0.2%). It’s been boosted by company earnings starting to rise again after three years of falls led by the miners and banks with earnings results over the last week, while mixed supporting this and a global investor rotation away from the tech heavy US.  This should support positive gains this year, particularly if we are right and the RBA is able to avoid further rate hikes this year, with the latest NAB survey providing some support with businesses saying final product price increases are running around levels consistent with the inflation target.  Against this: valuations are rich with the forward PE of around 19.7 times running well above average which is around 15 times and Australian shares offering virtually no risk premium over bonds just like the US share market; the RBA having raised rates is continuing to warn of more hikes to come if higher “inflation is entrenched”; and global uncertainty around US policies and geopolitics remains high which will impact our market if it flares up.  So, while we see more upside for the Australian share market, it may have run ahead of itself in the near term and it's likely to be a volatile ride. To hear more, tune in to Shane’s Simplifying Investing podcast here: Simplifying Investing | Podcast on Spotify.