Shares outlook: What to expect in the new financial year

The COVID-19 pandemic has hit global markets for six, introducing a volatility whereby the only certainty seems is uncertainty. Indeed, while the Aussie market plunged in late February, it's already clawed back about half of the losses. But what can we expect over the coming months?

Kris Walesby from ETF Securities cautions against reading too deeply into the rally.

"We anticipate uncertainty in markets to continue in the coming months due to the prospect of second and even third waves of COVID-19 infections," he says, pointing to new outbreaks in Beijing and a surge of new cases in the United States.

"Global lockdowns have had a significant effect on many sectors with resulting unemployment and it will take some time for the global economy to return to normal, whatever that may look like in the post-COVID world."

Against this backdrop, Walesby expects central banks to maintain low interest rates and consider quantitative easing and other stimulus measures.

Still, Walesby notes some promising signs that may predicate recovery.

"Companies feeding into the increased demand for online connectivity - be it for work from home arrangements, online shopping or entertainment and communication - such as Amazon or Facebook, have experienced growth in recent months and are likely to continue to benefit from use of their services."

"Biotechnology was already positioned for growth but companies like Gilead and Moderna have come into the spotlight with the global search for a COVID-19 vaccine. Such companies still have vast development pipelines beyond COVID-19 to turn to."

Robotics and automation is another beneficiary of the current environment that may lead way out.

"Lockdowns and increased demand for online shopping from warehouses is likely to accelerate the take-up of automation for warehousing, as well as other spheres. We expect see these trends continue to play out in the coming months."

Ajay Datt from Datt Capital takes a glass half full approach, believing that the outlook for equities over the next six months to a year is positive.

"There are virtually no attractive investment alternatives with fixed income rates not being commensurate with the risk being undertaken.

"Accordingly, we believe this is a positive environment for equity performance with the caveat that it is almost certain that this will come will a higher than usual level of volatility."

Charlie Viola from Pitcher Partners Sydney Wealth Management distinguishes between the situation here at home and overseas.

"Domestically, we still carry the belief that investors can be buying in cautiously at these levels, provided they are keeping some powder dry."

Viola expects the June 30 reporting to help clarify the impact of COVID-19 on the medium-term earnings outlook.

"Our message to investors has been to continue to invest cautiously but ensure we have some up our sleeve if we do see markets trace back a little. We do feel reasonably confident that markets will be in a stronger position in 12 months then they are today, but we think some caution is warranted."

Overseas is a different story, with Viola warning of a premature appetite for risk in the US.

"This seems optimistic, especially if you consider the various data points - jobless numbers, consumption data etcetera."

"We like most have advised many clients to keep any powder intended for global equities dry for the moment, and those who have now gone to an overweight position to pair back their holdings a little. Risks in our view here are well tilted to the downside, as we expect at some point reality will rush in."

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