FNArena’s Weekly Insights – April 19 2021

More Upgrades, More Potential For Aussie Shares

By Rudi Filapek-Vandyck, Editor FNArena

Back in early 2011, something odd was happening in the Australian share market. Equity strategists at investment banks and stockbrokerages domestically were predicting strong gains ahead for the Australian share market, at that time eyeing the 5000 level, but instead the index dropped towards 4000.

What caught my attention in early 2011 was that the bullishness expressed through strategists projections and forecasts was not supported by forecasts made by analysts who covered sectors and individual companies.

As it was, those forecasts were a lot less optimistic and as things developed, the lack of further upside as expressed through individual, bottom-up valuations and price targets proved more accurate.

The ASX200 didn’t break above 5000 until early 2013; a mere two years later.

I wrote a detailed analysis about it on 4 April 2011, titled How Much Upside Is There?

The reason why I am bringing this up again today is because the local share market is once again characterised by a similar large gap, only this time the roles have reversed. Many voices are reassuring investors the share market is over-heating and poised for a retreat, but this is not what is being reflected in analysts’ forecasts and valuations.

Time for a deeper dive into the finer details.

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