Here’s why ASX 200 shares still have ‘a pretty good growth outlook’

S&P/ASX 200 Index (ASX: XJO) shares have come roaring back following January’s sharp selloff.

That rebound now sees the ASX 200 up 1.7% since the closing bell sounded on 31 December. A performance that’s even more impressive when compared to the 3.8% loss posted by the S&P 500 over that same period.

The Australian market has been broadly supported by its prevalence of resource and energy stocks.

ASX 200 shares in the energy sector have raced higher in 2022, sending the S&P/ASX 200 Energy Index (ASX: XEJ) up an eye popping 30.8%.

Resources and materials companies have also outperformed, as witnessed by the 14% year-to-date gain posted by the S&P/ASX 200 Materials Index (ASX: XMJ).

On top of that outperformance over their global peers, analysts remain broadly positive about the outlook for ASX 200 shares.

Why the outlook for ASX 200 shares remains positive

Jun Bei Liu is the lead portfolio manager at Tribeca Investment Partners.

Commenting on the performance of the ASX this year, Liu said (quoted by The Australian Financial Review):

It’s been an incredible performance this quarter, and we’re still in a pretty good growth outlook. Higher commodities have played a big role, our domestic economy does look better, and it will grow better than the rest of the world.

Liu pointed out that ASX 200 shares performed strongly, despite some of the bigger growth stocks falling.

“It’s been incredibly volatile, and it has surprised me how strong we’ve pulled through this month,” she said. “But while there might be volatility because the growth names have sold off, the factors underpinning the Australian equity market will persist and all of that together will put us in a pretty good position.”

Inflation and soaring prices spur commodity stocks

Co-head of mining research at UBS Lachlan Shaw said investor concerns over rising inflation will have helped the performance of ASX 200 shares in the commodity space.

According to Shaw (quoted by the AFR):

Commodities are seen traditionally as a bit of an inflation hedge, and commodity prices are certainly doing their part right now. For now, they are getting a lot of interest from investors in terms of the inflation hedge, in terms of what’s showing up in the headline price.

Atop inflation concerns, most resources are trading at or near multi-year highs.

Demand for raw materials is soaring as the world recovers from pandemic closures, outpacing the sector’s ability to boost supply. The situation is greatly exacerbated by Russia’s invasion of Ukraine.

“Higher prices for longer means higher earnings and higher cash flows, and, for most of these names, a step-up again in returns and dividends,” Shaw said.

All of which should help the overall performance of ASX 200 shares in the months ahead.

The post Here’s why ASX 200 shares still have ‘a pretty good growth outlook’ appeared first on The Motley Fool Australia.

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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.

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