The Australian sharemarket’s record rally is anticipated to stall in 2026 as major superannuation funds shift investments to offshore markets. MST Marquee forecasts the S&P/ASX 200 Index to finish next year at 8600 points, slightly below its current level. This projection is based on an expected slowdown in superannuation money inflow, triggering a pullback in valuations.
Super funds, managing approximately $3 trillion of Australia’s $4.1 trillion pension pool, have significantly fuelled the sharemarket’s growth over the past two years. These funds have been injecting around $50 billion annually into the asset class, driving the ASX 200 above 9000 points in October. However, MST senior research analyst Hasan Tevfik suggests that decreased demand from these super funds and an increased share volume will weigh on the market in 2026.
Despite an anticipated recovery in company earnings for the 2026 financial year – the first expansion in four years – MST remains cautious. Tevfik notes that while a profits recovery would typically benefit Australian investors, current valuations are already high. Institutional funds invested only $5 billion into the ASX in the first half of 2025, while the sharemarket expanded by roughly $40 billion during the same period. According to MST, the supply-demand imbalance has been a key driver of extraordinary valuations for tightly held stocks.
In contrast, Macquarie is preparing for potentially higher interest rates, noting that cyclical sectors like media, retail, and discretionary stocks tend to outperform before the RBA begins tightening monetary policy. UBS, however, forecasts the sharemarket to reach 8900 by the end of next year, driven by a resurgent mining sector and steady profit margins. Morgan Stanley is even more optimistic, predicting an ASX 200 record of 9250, spurred by corporate profit rebounds and gains on Wall Street.
