After 140 months, or 4,284 days, the Australian sharemarket has broken the “illusive all-time [high] that was set back on 1 November 2007”, said Wealth Within chief analyst Dale Gillham.
One of the factors leading to the all-time high has been the low interest rate environment in the past few years, Mr Gillham said, which has seen an increasing amount of investors flood into stocks in search of greater income and higher returns.
“More recently, surging commodity prices, a weakening Australian dollar and companies posting record profits have all been catalysts for the market’s rise,” he explained.
“I also think another key contributor was the surprise election outcome, and positive investor sentiment that has steadily grown this year, which rallied even more so after the election.”
Mining companies have also played a key role in driving the Australian market higher, he said, with the mining sector up by over 24 per cent this year, and are moving in the same direction as the financials sector, which is up by nearly 17 per cent this year. These two sectors make up over half of the market capitalisation.
“While doom and gloom has surrounded the financials sector over the past few years, it got a strong lift after the dust settled from the fallout of the royal commission,” he said.
“[However], neither the banks nor the miners led the Australian market; instead, it was information technology and, surprisingly, communications services that have been the best-performing sectors this year, both up by over 30 per cent.”
Mr Gillham said the ramifications of the share-market reaching an all-time high are significant and should not be played down.
“We need to remember this marks the longest stretch in time for the Australian market to create a new high, so breaking this milestone now means investors have more certainty and confidence, and I believe there is further upside,” he said.
“That said, alarmists have been ringing the bell about a potential market crash once the All Ordinaries pushes through its all-time high, although, in my opinion, a market crash is definitely not on the horizon at this point in time.”
He predicts that the Australian market will continue to trade up strongly for a few weeks with a top end target of around 7,200 points.
“That said, I still expect the market is searching for its yearly high prior to pulling back into its yearly low,” he cautioned.
“My expectation is that the market will continue to rise through to late August or early September, before falling into a low late September or October, with the decline likely to be around 8 to 15 per cent from the high.”
While investors who are buying over the medium to longer term should expect a small dip in their stocks before the end of the year, he said, it will only be short-lived.
“The best sectors for opportunities I believe will be financials, energy and materials,” he added.
