Australia's stock market is expected to surge in 2017, sloughing off two years of volatile but sideways movement, though the 6,000 point barrier remains out of reach for now, a Reuters poll of analysts and strategists found.
Buoyed by rebounding commodity prices and recovering global growth, 2017 is expected to be the Australian benchmark S&P/ASX 200's best year since 2013, adding nearly 7 percent on top of Tuesday's close, according to the median forecast of 16 strategists polled.
It is the third straight quarterly Reuters stocks poll in which respondents have predicted a strong 2017 for Australian stocks.
The poll was taken before Wednesday's news that Australia's economy unexpectedly contracted in the September quarter.
Spiking bond yields and political uncertainty, particularly around the incoming Trump Administration, are seen as the greatest risks facing the expected rally.
"There is an expectation that when Trump actually comes into power that we could be in a period of heightened headline volatility," UBS head of equity capital markets syndication in Australia, Richard Sleijpen, told journalists at a roundtable on Monday.
Since Wednesday's weak gross domestic product data - the quarterly fall of 0.5 percent was the first decline in five years - some economists now see a recession risk.
Australia's S&P/ASX 200 closed on Tuesday at 5,428.69 points, a gain of 2.5 percent for the year to date.
It is forecast to gain another 1.3 percent before the end of 2016, reaching 5,500 points, to cap a volatile year where the index plunged and then rallied following the twin shocks of the Brexit vote in June and Trump's electoral victory in November.
By end-June 2017 the index is seen reaching 5,700 points before extending gains to 5,800 points by end-2017.
Although retail sales have been soggy, and wage growth anaemic, market sentiment has been buoyed by strong rallies in commodity prices, especially iron ore and oil, which account for half of Australia's exports by dollar value.
On China's Dalian Commodity Exchange, iron ore has jumped more than 70 percent since mid-September. Oil has climbed nearly 20 percent over the same period.
Australia's central bank says a long pullback in mining investment is almost over, and better-than-expected income and jobs data in the US last week boosted growth estimates there.