Keeping bullish amid volatility
Nicholas Grove  |  23/04/2014Text size  Decrease  Increase  |  

Nicholas Grove: I'm Nick Grove at the Morningstar SMSF conference for 2014. I'm joined by Morningstar head of equities research, Peter Warnes. Peter, just generally speaking, where do you see the economy and the market heading as we close out the 2014 financial year?

Peter Warnes: Nick, I'm still relatively comfortable, albeit, not extremely bullish, but I'm comfortable the economy is gaining some traction - we are rebalancing slowly. We will be below trend for a little while. But having said that, I think that you're going to get an economy on the improve if it suddenly gains some traction.

From the market's point of view, again the market is trying to tell you that that's what's happening and they are comfortable with it. Having said that, volatility is still going to be a constant companion, but I think volatility around a gradually a rising trend is what we're looking at. I'm still quite comfortable with our forecast of the ASX 200 being closer to 6000 by the end of the year than where it is today.

Grove: You say, you are not terribly bullish on a lot of things, but are there any particular sectors you are a little bit bullish on?

Warnes: Well, Nick, I'd say the demographic is still that the demand curve for healthcare is going to continue to increase and increase substantially. That ageing demographic is also obviously positive for things in the retirement space, so healthcare and the retirement space is interesting.

As this economy starts improving, banks are still the bankers to the economy and as that gains traction then banks are going to do better - their cost-to-income ratios will improve. And they've put a lot of money into IT and technology - those benefits are yet to come through. And while the bad debts are now at probably a cycle low, I don't think all of a sudden they are going get blown out of the water either.

Grove: Pete, thanks very much for your time today.

Warnes: Thanks, Nick.

Grove: I'm Nick Grove at the Morningstar SMSF conference in 2014.

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