Insights

There’s a shock coming for ASX investors: expert

T Rowe Price’s head of Australian equities has warned stock enthusiasts to brace themselves for the coming AGM season.
The post There’s a shock coming for ASX investors: expert appeared first on The Motley Fool Australia. –

The coming annual general meeting (AGM) season is a major danger for the share market and ASX investors should prepare accordingly.

That’s the opinion of T Rowe Price Group Inc (NASDAQ: TROW) head of Australian equities Randal Jenneke, who warns there’s a “very real prospect of a 5% to 10% market correction” this year.

Jenneke says: “The recent dramatic fall in the iron ore price is a good example of our concerns.”

AMP Capital chief economist Dr Shane Oliver agrees, saying local “shares may still have more downside” and that a correction is on the cards before 2021 is done.

Lockdowns in Australia are killing the mood

While the half-year results season in February was very optimistic, the Delta strain of COVID-19 had since soured sentiment for ASX shares.

“(A) victim of the east coast lockdowns was the upbeat earnings outlook from earlier this year,” Jenneke said. 

“We saw roughly twice as many downgrades as upgrades for FY22 earnings growth estimates. This was a big shift from half-year results, which was one of the best from an earnings vs. upgrades perspective in decades.”

The next big problem for ASX shares

The change in international liquidity is the next major hurdle for Australian stock portfolios, according to Jenneke.

“Tapering is coming and the credit impulse of the world’s three largest economies (USA, China, European Union) is already negative,” he said.

“Combined with earnings growth sliding into downgrade territory (and) still-elevated PE dispersion, we are likely to see investors become ever more focused on stock fundamentals.”

The next round of updates from ASX companies is due over October and November when AGMs will be hosted. It’s also the season for stockbroker conferences.

Jenneke warns ASX investors to prepare for disappointment over this period.

“We believe these updates are more likely to disappoint overly rosy market expectations,” he said.

“Earnings downgrade cycles come in waves — only the first one has broken!”

How T Rowe Price has its portfolio positioned

Considering these upcoming risks, Jenneke reveals how T Rowe Price has shifted its Australian stock composition to negate the effects.

“We shifted our positioning away from domestic cyclicals and more towards higher quality defensive businesses, reflecting our concerns about slowing growth, rising earnings risks, high valuations, and diminishing government and central bank support for markets,” he said.

“This view is rapidly becoming consensus but isn’t quite there yet, with some investors remaining stuck in the reflation camp, albeit in smaller numbers.”

The post There’s a shock coming for ASX investors: expert appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More reading

5 things to watch on the ASX 200 on Monday

Is this ASX 200 miner one of the best value shares to buy today

These were the worst performers on the ASX 200 last week

The ANZ (ASX:ANZ) share price is trailing behind the big four today
September has not been a great month for the Mineral Resources (ASX:MIN) share price

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!