Signs that the domestic economy is on a robust track for the rest of this year bode well for Australian equities and the local currency, according to UBS, countering the more aggressive path projected for the Reserve Bank cash rate.
“Right now multiple assets signal that the Australian economy should remain strong through 2022. In equities this has fed through to impressive upgrades to earnings over recent months, even as other equity markets have seen a loss of momentum,” said Richard Schellbach, strategist at UBS.“We believe that the same fundamental drivers also justify why the Australian dollar is strong, and the yield curve in Australia has remained upward sloping even as its US equivalent has inverted.
The broker underlined Adairs, Eagers Automotive, GUD Holdings, Premier Investments, Super Retail Group and TempleWhile the Australian dollar usually declines in periods of slowing global growth, UBS noted that the currency has been able to buck this trend due to the backdrop of rising inflation. This strength is expected to flow through to the equity market.