Stock market slows ahead of speculated rate cut

Mr Gilham said it wasn’t surprising given that Australian equities have had a stellar run in the first quarter of 2019, and are trading at the highest level since December 2017.

“The RBA is set to meet early next week to decide on a potential rate cut. While many are predicting this is inevitable, economists are also indicating we may see another one to two rate cuts throughout 2019,” he said.

“While I believe any cut to interest rates may be a little premature given the surprise election outcome and the likely cash stimulus to be injected into the economy with the $158 billion tax cut package, I am sure there will be many other factors on the RBA’s mind when they do meet.”

Mr Gilham said there has been a lot of speculation of late that the Australian stock market would crash following the election and the pending outcome of the US–China trade war.

“Analysts have been pushing the idea that Australian stocks are overvalued and, therefore, at risk of a pullback. But from experience I can say that these comments are often made with the intent to inflict fear into investors to increase volatility and push prices down, so the big end of town can take advantage of market emotions,” he explained.

“It is normal for investors to be concerned about the erosion of profits made during bull markets; however, listening to speculation rather than sound logic can often lead to reactive decisions based on fear, which is usually an investor’s biggest downfall.”

It is unclear why experts are speculating that the Australian market is so overpriced, he said, when it is yet to reach its all-time high set nearly 12 years ago in 2007.

“In comparison, other major markets around the world have made consistent new all-time highs. I would agree that the US market is slightly overvalued and due to slow from its stellar run, with the uncertainty surrounding the trade war between China and the US potentially being the catalyst for this to occur,” he noted.

“What’s important is that we don’t get too caught up in this speculation, as it can lead to poor decision-making given that not all stocks are overpriced. Overall, the Australian market is bullish, and I believe it will continue to be so, as companies report record profits and strong growth figures.”