For months, Morgan Stanley strategist Michael Wilson has been steadfast in his view that markets had become far too optimistic in pricing in a world where inflation would fall, interest rate cuts would arrive, and the economy would remain resilient enough to support strong earnings growth.But with the S&P 500 up 17 per cent in the past six months to 5308 points, his target for the index of 4500 points was looking silly.
“This implies that if US stocks keep grinding up, it would be highly unusual for Aussie stocks not to participate.” • The ASX keeps rallying despite a subdued macroeconomic environment, typified by sticky inflation, higher-for-longer rates, and a weak GDP growth outlook.• Dry powder that can be deployed into rising markets. Schellbach points out that at the end of 2023, Australian self-managed super funds – which he argues is a good proxy for the retail investor community – held $170 billion in cash.
• A “this time it’s different” view of the willingness of governments and regulators to avoid a recession at all costs. “We find many of the laggard trades interesting, given if rates are headed down, and economies can engineer a Goldilocks outcome, then surely at some point these names will begin participating.”