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The ASX200 just closed on a new historical high

Posted: 30 July 2019 5:59 pm
News

Explosion!

It has taken almost 12 years but Australia's stock market has finally broken through its pre-GFC all-time high.

For weeks, the ASX200 has been taunting investors as it edged tantalisingly close to new record territory.

On Tuesday, it happened – Australia's benchmark ASX200 index surged to its highest ever point in history at 6875.5 just 30 minutes after the market opened, surpassing its previous record of 6851.5 set in 1 November 2007.

By the end of the session, the ASX200 had risen 0.3% to set a new record market close at 6845.1, while the All Ords rose 0.2% to close at 6928.3. The previous ASX200 record close was 6828.7.

After the All Ordinaries set its own fresh record late last week, it was really just a matter of time before the ASX200 finally caught up.

It follows years of speculation about when Australia's share market would finally claw its way back to its 2007 glory days before the 2008 global financial crisis sent shares plummeting by almost half. It has taken Australia around six years longer to do so than US markets.

ASX200 historical record close dates

DateOpenCloseHighLow
7/30/20196,825.806,845.106,875.506,825.80
11/1/20076,778.406,828.706,851.506,777.30
7/29/20196,794.406,825.806,834.406,794.40
7/25/20196,771.106,818.006,818.006,771.10
7/26/20196,814.506,793.406,814.506,779.50
10/29/20076,727.106,792.106,792.106,726.90
7/24/20196,730.506,776.706,783.306,729.80
10/11/20076,736.906,771.906,782.506,710.90
10/18/20076,697.106,767.706,767.706,696.10
10/31/20076,731.706,754.106,775.806,710.80
7/5/20196,718.006,751.306,769.606,714.80

The Aussie stock rally on Monday and (to a degree) Tuesday wasn't unexpected. It comes as Wall Street's S&P 500 and Nasdaq indexes reached their own record highs overnight on Friday as hopes for a rate cut were further bolstered by weak US economic data. Source: Yahoo Finance

Should the Federal Reserve cut rates this week as investors here and in the US are betting, it will be the first time the US central bank has done so since 2008.

Historically, stock markets do well when interest rates continue to fall. Markets here and globally have been rising this year as central banks show signs that they'll be continuing with monetary-easing measures and rate cutting to bolster weakening economies.

Is it a bubble?

What goes up, must come down. The big question is, how long do we have?

The bullishness of the US and Aussie stock markets this year came as somewhat of a surprise to analysts. If you remember last year's commentary, the running theme among market experts and economists was that 2019 was going to be a volatile year for stocks. As it turns out, market indices have been staggeringly successful so far.

Shortly before the close of market Tuesday, I asked AMP chief economist Shane Oliver whether he believed we're facing a scenario that might be similar to the one we witnessed in 2007 and how he thought investors should be responding.

"The market surprised me on the upside," admitted Oliver. "I thought this year would be a good year for the share market, but not this good."

In fact, if you'd asked him earlier this year whether we'd be surpassing our historical market highs by July, he said he would have said no.

In the last few months, the Aussie share market has taken a dramatic upward turn, increasing wariness by some investors that the inevitable fall will be a hard landing. But while Oliver admits that he's wary of a short-term pull back, he doesn't think we're in bubble territory.

"People think that since it's gone to a record high, we must be in a bubble. It's taken us nearly 12 years to get that record high. It's hardly the definition of a bubble," said Oliver.

In Oliver's view, the market is recovering from its GFC-era losses, and we still have some way to run yet. He predicts that in 6-12 months' time, the share market will be in a higher position than it is today, despite the potential for bumps along the way such as the US-China trade war, continued weak economic data and interest rate movements.

"I don't see anything that's going to cause a major setback unless you see a recession coming from the US, which I don't see."

Onward and upward.

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