Australia’s sharemarket faces another year of modest returns, with domestic headwinds a greater concern than escalating Middle East tensions for investors. Despite oil climbing towards US$80 a barrel after renewed US-Iran strikes, the S&P/ASX 200 Index traded largely sideways on Monday. Plato Investment Management’s Dave Allen suggested markets have become accustomed to regional flare-ups, believing only a sustained attack on energy infrastructure or prolonged Strait of Hormuz closure would trigger a significant market reaction.
The local bourse’s underperformance this year has been stark, returning less than one per cent. This contrasts sharply with double-digit gains on Wall Street and significant surges in Korean, Taiwanese, and Japanese markets, largely buoyed by chipmakers. This highlights Australia’s limited direct exposure to artificial intelligence. Compounding this, fading earnings for the big four banks—which collectively account for roughly one-quarter of the S&P/ASX 200 Index’s value—remain a major challenge for the local sharemarket.
Analysts remain cautious. Ten Cap chief investment officer Jason Todd projected the ASX would reach no higher than 9100 points by year-end, potentially dropping to 8400 points, a five per cent decline. He attributed this to tight monetary policy, weak consumer confidence, slowing housing activity, and earnings risks across banking and healthcare, compounded by limited AI exposure. Cannacord Genuity’s head of investment strategy, David Cassidy, identified weak bank earnings as the primary issue. Cassidy cited potential mortgage price wars from slowing home loan growth and rising business loan defaults as significant pressures. These banking headwinds and limited tech exposure mean the ASX 200 is expected to struggle for double-digit returns, likely lagging global equities.
