My opinion only, but I see this as a likely outcome.
Term deposit n the bank Paying 4.8% Asset value to earnings ratio 20.8 ASX 200 5.5% return P/e ratio 18
Asx 200 should be paying 4% plus return above the bank rate which would require a pe ratio of 11 but its currently 18. This means that the asx is overvalued by a Pe of around 7 and would requre a drop in share prices generally by 38% to 40% which would effectly lift the return on investment as percentage from a lower share price. If we have a recession you could wipe another 20% off on top of that.
Correction predictions. 6875x .60%5500 if the market corrects to my calculation. 5500x .80% 4400 if there is a global recession.
Covid delayed a correction because the bank rates were nearly zero. When bank rates increase the expectation for higher returns in the market increase due to inflation and general market expection the asx will pay 3 to 5% return above the bank rate.
The asx 200 droped from 7050 to 4800 march 2020. I think the world is close to a financial crash especially Australia, covid was a drop in the ocean.
