Markets are facing two significant hurdles, according to David Bassanese, the chief economist of Australian investment fund provider BetaShares.

The first, he said, is the US Federal Reserve talking about two rate rises this year, with the first one in June.

“The markets are still not factoring in a rate rise in June, so we have what is basically a stand-off between what the markets are expecting and what the Fed is planning,” he said.

“If there is a pick-up in inflation, because unemployment is so low, that could potentially be a very negative turn of events, because it’ll basically force the Fed’s hand into raising rates.”

The second hurdle is the sustainability of China, he said.

If the apparent rebound in growth and the rebound in its property sector off the back of stimulus and easing of credit conditions does not continue in the second half of the year, “commodity prices will come crashing down to previous levels”.

The prices of high-growth stocks, like resources stocks, are expensive at the moment, and any slump in the economy caused from the events above will see “highly priced growth stocks face the biggest pain”, Mr Bassanese said.

“In contrast, should the economy do OK, I think they’re still going to struggle; at best they’re probably going to go sideways in price rather than up that much, and there is risk they will have a sizeable correction,” he warned.

The valuations in the resources sector in particular, he added, are counting on quite a sizeable rebound in commodity prices over the coming year.

“I don’t think this is likely, so I think the resource prices have probably run ahead of likely return of earnings there,” he said.