Australian equities may still be overpriced despite recent falls, with better value on offer in other global markets.
The benchmark S&P/ASX200 has fallen about seven per cent so far this year but JP Morgan Asset Management global strategist Kerry Craig says the financials and resources that continue to dominate the market are likely to weigh on earnings in 2016.
Mr Craig says the progressive dividend policies investors have found so attractive for so long are now open to question.
"You have these massive megaweight resources and financials ... because of that, you're going to see not as great returns from the Australian market as elsewhere around the world," Mr Craig said.
"The market is cheaper, but it's not cheap enough."
Bank earnings growth has been widely tipped to slow due to a cooling in the housing market and tightened lending restrictions in the investor market, while the mining giants are faced with falling prices and reduced demand due to China's failure to sustain its pace of growth.
BHP Billiton has cut its full year iron ore production target and said on Wednesday its first-half results due in February will include writedowns worth $US911 million ($A1.32 billion).
That's on top of the $US7.2 billion ($10.3 billion) writedown in the value of its US shale assets that BHP announced last week.
"A lot of earnings estimates are based in a rebound in commodity prices and resources coming back through," said Mr Craig, adding that markets in the eurozone were starting to look more attractive than Australia or the US.
"If you don't see that, you don't see that earnings downgrade cycle turn."
Mr Craig said JP Morgan expects the housing market to further cool but that the growth in property prices would slow rather than reverse.
"That wealth effect will still be there for many consumers, but not perhaps at the pace it was," he said.
"If the RBA had the choice, they'd probably want to move on rates but there's always a question when rates are this low of what the actual impact of lowering them any further would be, what it means for the housing market and any potential fuelling of bubbles there."
Mr Craig said the RBA would hold off on a rate cut as much as possible.
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