Finance - ASX Hits Record High
Australian shares rode the tide of low interest rates and a US trade deal with China to reach record highs this week, but the experts are warning of volatile times ahead.
A day after the ASX 200 passed 7,000 for the first time, the benchmark index closed at 7,064 points. That was off of it sessions high, but still up 0.3 percent and still above that 7k mark.
This follows the US stock market storming ahead with all three indexes closing at record highs. The Dow Jones Industrial Average gained 267.42 points, or 0.92 percent, to 29,297.64. The S&P 500 index advanced 27.52 points, or 0.84 percent, to 3,316.81; and the Nasdaq Composite index added 98.44 points, or 1.06 percent, to 9,357.13.
But just like Wall Street, there are rumblings that the local market is over-valued, and the balloon could pop with another downturn in US-China relations or some other trade dispute pulled out of the White House's back pocket.
"The problem when you have very high valuations is that when we see even the smallest shock to the system, it will resonate more significantly, and you'll get heavier sell-offs," said Chris Weston, head of research for Pepperstone.
Also, corporations report earnings next month, and some believe that actual profits might not justify the exuberance investors showed over the past couple of weeks.
"Aussie stocks are on track for some uninspiring profit growth, battling a cautious consumer and a weak domestic economy, notwithstanding an unprecedented bushfire season that only reinforces those soft conditions," said Saxo Markets strategist Eleanor Creagh in an interview with the ABC. "Profit headwinds for the banks, which make up a large portion of the index, are also adding to the patchy earnings picture."