S&P/ASX200 tipped to hit 8300: VanEck

The S&P/ASX200 is set to rise nearly 10% to 8300 by the end of the year, VanEck predicts, as Australia will also continue to avoid the "most anticipated recession" that never happened.

Australia's blue-chip stocks are poised to surge further after skyrocketing to 7800 in recent months.

In the past two and a half years however, they traded between 6500 and 7500 weighed down by soaring interest rates, stagnate earnings growth, and fears of an imminent recession.

Trading at about 7688 this morning, the S&P/ASX200 is expected to increase 8% at year's end.

"On balance, Australia should avoid a recession with the RBA holding the cash rate at 4.35% until at least 2025. Inflation may prove to be stickier than the market anticipates, which reaffirms our higher-for-longer bias," VanEck's Australian equities outlook report shows.

Market confidence comes off the back of a soft landing that is likely to eventuate, VanEck said, noting that large caps, namely the major five banks, have delivered stunning returns.

"However, share price appreciation has outpaced earnings growth with price to 12-month forward earnings (forward PE) above its historical average," the report read.

In the year to March, technology stocks returned 51%, while real estate and financials delivered 37% and 28% respectively.

The banks appear to be overvalued and are the most expensive globally, said VanEck portfolio manager Cameron McCormack.

"Australia's banking sector is vulnerable to a correction and investors should be wary if they are overexposed," he said.

Meanwhile gold miners, and office and retail REITs appear to be undervalued.

Australian mid-caps are tipped to be the "star performer" this year and will outperform the S&P/ASX 200.

"Smaller companies offer more upside potential through market share expansion and have historically outperformed in prolonged market recoveries. Valuations are attractive with 12-month forward price to earnings below the historical average. Mid-caps also reported the highest upside price target revisions during the February earnings season," McCormack said.