‘On fast forward’: Australian stocks stage recovery


These included casino giant Crown, fashion retailer Premier Investments, toll road operator Transurban and buy-now, pay-later provider Flexigroup.


The local bourse has posed a stronger and more resilient upswing in the face of negative macroeconomic conditions, research from Mr Stoltz and his team reveals, which compares the ASX’s recent recovery to other notable crises such as the global financial crisis (GFC)

Australia’s unemployment rate will be at 9 per cent by Christmas, the Reserve Bank expects, and economists have pencilled in a near-certain recession, with the broader economy to contract 8 per cent by the end of June.

Despite this backdrop, Mr Stoltz said the market has already begun a long-lasting recovery, drawing a stark contrast to the GFC where the country avoided a recession but the market fell 54 per cent over 17 months before reviving.

Mr Stoltz said the economic ‘hibernation’ many businesses have been in since March will allow a swifter and more seamless return to normality, unlike other crises where investors faced months of uncertainty over the rate of recovery.

This has been reflected in the pace of earnings downgrades from analysts overtaking the rate of the price fall, reflecting a broad re-rating of companies to account for the post-crisis world.

Chief executive of Pengana Capital Russel Pillemer says he's still cautious about calling a bottom of the market.

Chief executive of Pengana Capital Russel Pillemer says he’s still cautious about calling a bottom of the market. Credit:Joe Armao

“The speed of negative earnings per share forecasts has accelerated indicating that the market is close to fully digesting the impact of this crisis on company profits,” Mr Stoltz said.

Other sharemarket experts are also hopeful about a potential turnaround. Pengana Capital chief executive Russel Pillemer said the market had already “baked in” any negativity associated with the coming recession or jobs figures, though he noted he was still being very cautious in the near term.


“You always need to be cautious in these highly volatile environments trying to pick a top or trying to pick a bottom,” he said. “Contrary to popular academic belief, markets are not rational.”

Looking towards the 2021 financial year, analysts are priming for huge earnings growth thanks to a lower base of earnings in 2020. Goldman Sachs recently forecasted retailer JB Hi-Fi’s earnings before interest and tax to rise 21.3 per cent in fiscal 2021.

Mr Stolz said these bullish predictions will likely be short-lived, as overly optimistic analysts temper their expectations as earnings season draws nearer.

“Those 2021 numbers are likely to move down, so we probably won’t see the high growth rates that consensus implies right now,” he said.

But for Mr Pillemer, his sights are firmly set on 2021 and beyond, saying his funds’ cash-on-hand are at record lows as they’ve poured money into snapping up undervalued stocks for the long term.

“We haven’t seen these sorts of buying opportunities for many years because the market’s been so finely priced,” he said.

“I think the world’s going to go through a soft period for a while, but if you can look through that it’s a fantastic time to be investing.”

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Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.

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