The S&P/ASX 200 Index has soared to a new record high, closing at 9227.8 points and gaining over 4 per cent in the past month. This robust “risk-on” rally reflects several key factors. UBS strategist Richard Schellbach notes Australia’s limited pure AI tech exposure often benefits the ASX during global AI sector disruptions, attracting Asian investors as AI chip stocks recently struggled. However, this support may be waning as the AI trade shows signs of resurgence on Wall Street, signalling a potential shift in focus.
Two further comforts buoyed investor sentiment. Firstly, US Treasury Secretary Scott Bessent’s claims of an impending deal with Iran to reopen the Strait of Hormuz, though possibly premature, led to lower oil prices and bond yields, indicating a broader US de-escalation effort in the Middle East. Secondly, the Reserve Bank of Australia’s perceived dovish tilt has significantly influenced market behaviour. Substantial gains in consumer and bank stocks, Schellbach noted, suggest many investors believe the RBA’s rate-hiking cycle is complete. However, economists like Citi’s Josh Williamson question if monetary policy is truly as restrictive as the RBA believes, given resilient household spending data.
Looking ahead, house prices remain a critical focus, with RBA Governor Michele Bullock framing them as “a bit of a litmus test” for the economy. Falling prices could impact various sectors, though potentially helping avert further RBA rate increases. Crucial insights are expected next week. Online property classifieds giant REA Group, providing digital platforms for real estate listings and property-related information, releases earnings and a spring property market outlook. Furniture retailer Nick Scali, offering a range of indoor and outdoor furniture, will update on consumer wealth effects. Finally, Commonwealth Bank, Australia’s largest bank providing a full range of financial services, delivers full-year earnings. Commentary on mortgage growth, competition, and macro uncertainties will be keenly watched; a negative tone could quickly dampen market excitement, JPMorgan analyst Andrew Triggs noted.
