Excellent summary by Gerard Minack of headwinds facing the ASX:
Excluding miners, the listed sector enjoyed 15%-plus annual sales growth last cycle; now nominal sales growth is less than one-third that pace….
Structurally lower domestic sales, combined with the stress in the resource sector – which, in my view, is not at its lows – points to further under-performance of Australia equities versus other developed markets….
There are reasons to be positive about the medium term outlook for Australia. But the problem for investors is that increasingly the equity market does not reflect the economy. Australia’s listed market has a much larger exposure to financials and materials (which includes miners) than other markets – and these sectors’ share of market capitalisation are much larger than their share of the domestic economy. Put simply, Australia’s equity market is overweight two sectors at the end of their super-cycles; it is overweight the past and underweight the future.
Not sure I would go so far as to exclude banks and mining from Australia’s future. Collapse of the commodity market is cyclical — admittedly the China slow-down is likely to be a long cycle — rather than a secular trend. Bank growth is also likely to slow, both from sluggish housing and job growth (from mining). Again this is cyclical rather than structural.