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by Peter Switzer

Okay, you might be thinking that the USA’s economy is looking better than expected and its stock market looks poised to have a pretty good year, but what about the Aussie market?

After all, last calendar year we finished down about two per cent while the Yanks on the S&P 500 ended up around 12.6 per cent.

What happened to the follow-the-leader argument that if Wall Street goes up, so do we? I have always warned that the relationship is pretty reliable but there can be exceptions and 2010 was one of those.

The outlook

So what about 2011?

The consensus I am hearing from Macquarie Bank, CommSec and the like is that the S&P/ASX 200 is heading to 5400 to 5600.

On my Sky News Business Channel program last night, AMP’s Shane Oliver said he was thinking 5500 and so when you calculate it, we’re talking about 12 per cent return if he’s right and that doesn’t include dividends.

Personally I think we could do better than that given out weaker result last year. And making me more positive is the view from bond experts who now are arguing that stocks will do better than bonds this year.

This comes as economic readings in places like Europe and even Ireland are coming through better than expected and pundits are even suggesting that the Yanks will raise interest rates this year.

The make-up year

I reckon 2012 could get tricky with rising interest rates and budget austerity programs acting as headwinds but this year looks like it could be a good one.

Of course, that does not mean it will be all up and up and away but it does mean that stocks have a good chance to outperform fixed deposits and bond funds. And given our weak showing last year, this could be the make-up year.

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Published on: Friday, February 04, 2011