Forget the drama and economic data releases last week including Donald Trump’s slamming China on twitter and raising more tariffs or the fact that the US Federal Reserve cut interest rates for the first time since the GFC. The big news last week was that our share market hit a fresh all-time high, surpassing the November 2007 previous high to be up a huge 21% this calendar year.
The decision by central banks around the world to cut interest rates sparked a global rally in equities on bets that accommodative monetary policies could boost earnings. The RBA’s back-to-back interest rate cuts in June and July, the first changes in monetary policy since September 2016, assisted the local share market to rally.
Looking at various sectors of our market, the coalition’s surprise election win triggered a 12% relief rally in bank stocks as fears of the abolishment of franking credit and negative gearing under a Labor government evaporated. Bank stocks and the finance sector have put on almost 23% since January. A massive rise in the iron ore price, to a 5-year high, has pushed resource stocks 26% higher this year and even the energy sector, which has been one of the the worst performer on the ASX 200, has advanced 14% this year.
Analysts currently disagree on where our share market will go after this record rally with Citigroup and Morgan Stanley Wealth Management promoting a continuation of this rally while Goldman Sachs are downgrading the market to “underweight”.
Too bad the market couldn’t hold onto the highs by the close of the week – thank you Mr. Trump!