An historic milestone: the ASX200 cracks 9000 for the first time

The ASX200 climbs to a fresh record high. Sentiment is bullish but valuations look rich.

The ASX200 hits 9000 for the first time

A major milestone for the ASX200 today. The index has climbed above 9000 for the first time in history – marking a new record high. The catalyst for the move is slightly vague. Although reporting season is the big domestic story, results have been a pretty mixed bag. Big sell-offs in CSL and James Hardie can attest to the fact that, if anything, companies are being punished for misses more than they are being rewarded for beats. The big thematic driver of the market has been a global rotation from growthier tech names to cyclical stocks, in part catalysed by changes in global rates curves as the markets bet on looming US rate cuts. That dynamic has seen flows move into sectors and geographies more cyclical in nature. Chinese stocks, for instance, have hit a ten month high.

Sentiment is bullish but valuations look rich

The risk to the market now is that valuations start to deter buyers. Just like Wall Street, multiples look lofty at the moment. Forward price to earnings multiples are around the levels they were at the start of the year when everyone was screaming “bubble”. Although multiples are never a strong indicator of turning points, they can tell you if the market is likely to be more sensitive to a negative shock. In the immediate term, that puts Friday night’s (AEST) speech from Chairperson Jerome Powell into focus. If the Fed doesn’t deliver guidance that supports the rate cuts currently being priced into US rates curves – 82% of a cut is priced-in for September and there’s a one-in-three implied change of 75 basis points of cuts before year end – then equity markets could have the rug pulled from underneath them.

(Source: Trading View)
(Past performance is not a reliable indicator of future results)