Investors will be able to look back at this period as an “excellent time” to be invested, according to Fidelity, but volatility is still likely to be present.
While it may have been a volatile year, the firm felt it would be reflected upon as a positive time in five years time.
But it would take several years for Australia to return to its pre-COVID levels as this was dependant on the vaccination roll-out and border re-opening.
Paul Taylor, head of Australian equities at Fidelity, said: “The recovery is well underway, and I think in five years’ time we will look back on this period as having been an excellent time to have invested in the equity market for the long term. Having said that, investors should not expect this to be without volatility along the way”.
Regarding inflation and interest rates, Taylor said he believed rates would rise sooner than had been forecast by the central bank in order to deal with rising inflation.
“Our own Reserve Bank of Australia (RBA) has also highlighted that they do not believe they will have to significantly increase interest rates until 2024 – which is when they think we will start to see real wage growth. It is fair to say that the market does not believe them, and has priced in higher interest rates sooner.
“My view is that interest rates will go up, but because of the current temporary inflation, we’ll see volatility increase and interest rates take on a shark-tooth type of...