Australian equities are trading at high valuations globally, according to Morningstar equity market strategist Lochlan Halloway. He noted the ASX is currently at a 9 per cent premium to fair value, one of the highest among markets covered by Morningstar. This overvaluation follows a period in 2025 where the market briefly appeared reasonably priced.
Holloway pointed out that a rebound in commodity prices and improved global risk sentiment has contributed to the ASX’s current premium. Although the ASX also traded at a similar premium last year, it still managed to post a 7 per cent price return in 2025. However, the overall valuation masks considerable dispersion within the market.
While the equal-weighted market trades just 1 per cent above fair value, over a third of stocks under Morningstar’s coverage are considered undervalued, exceeding the 10-year average. The major banks, which are deemed expensive, significantly influence the index and contribute to the overall overvalued status.
Given the stretched valuations on the ASX, Holloway suggests investors might find better opportunities by looking at international markets. This shift in focus could potentially offer more value compared to the current domestic landscape.
