What would more stimulus mean for ASX 200 shares?

ASX 200 shares like Afterpay Ltd (ASX: APT) have surged in 2020 but what would more stimulus mean for share prices next year?
The post What would more stimulus mean for ASX 200 shares? appeared first on The Motley Fool Australia. –

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With a very strong quarter almost under its belt, the S&P/ASX 200 Index (ASX: XJO) appears to be flying home towards Christmas.

Just yesterday we saw the likes of Afterpay Ltd (ASX: APT)Wesfarmers Ltd (ASX: WES) and Xero Limited (ASX: XRO) hit new record highs.

But according to at least one major bank, more government stimulus could be on the way in the next few years. What would that mean for Aussie investors and their favourite ASX 200 shares?

What more stimulus could mean for ASX 200 shares

According to an article in the Australian Financial Review (AFR), Westpac Banking Corp (ASX: WBC) chief economist Bill Evans thinks there could be more stimulus ahead.

Westpac expects the Reserve Bank to spend $300 billion over the remainder of 2020, as well as throughout 2021 and 2022, via large-scale bond purchases.

That means more money flowing around the economy that needs to find a home. Economists are also holding out for the Mid-Year Economic and Fiscal Outlook on Thursday for further evidence of a strong economic recovery.

Surging iron ore prices and optimism regarding COVID-19 vaccine rollouts have propelled ASX 200 shares to one of their best quarters in the last two decades.

In fact, the benchmark index is up more than 14% since the end of September thanks to strong share price gains from the likes of Afterpay and Wesfarmers.

What do fundies think of the proposed stimulus?

Chief investment officer at Vertium Asset Management Jason Teh was quoted as saying “momentum is strong”.

Mr Teh noted the strong performance from the banks in recent months but is not looking to buy in right now.

However, according to the AFR, Macquarie Group Ltd (ASX: MQG) equity strategists are reportedly reducing exposure to stocks that benefit from low yields such as gold and growth shares.

Foolish takeaway

ASX 200 shares like Afterpay have been propelled higher in 2020 but, if these stimulus reports are anything to go by, it seems there is still plenty for investors to be optimistic about as we head into the new year.

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Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and Xero. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post What would more stimulus mean for ASX 200 shares? appeared first on The Motley Fool Australia.

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