The local equity market has priced in a falling $A, but what if it's wrong

The local equity market has priced in a falling $A, but what if it's wrong? As we noted in our report, it should be clear to investors that the Australian economy - and earnings -are hostages to the $A. There are two possible scenarios. Firstly, if the $A falls, it will provide a growth and inflation stimulus to the economy which will flow through to a number of sectors and stocks. At 5,500, the local equity market is priced for the $A to fall to around 85 cents and stimulate economic growth which will flow through to earnings growth. But if the $A stays strong, domestic companies are in trouble. That risk suggests the market is at least fully valued. Read the full report: (VIEW LINK)