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After I recently discussed with HotCopper Editor Isaac McIntyre on the HotCopper Wire podcast – only weeks ago – it was in recent history that it looked like the XJO could hit 9,000 by December.
In fact, we got there in mid-late August. The keystone measurement of the bourse’s health climbed above that milestone on Thursday, leading to a profit-taking Friday, with the index closing just below.
But there’s not much reason to think we can’t keep climbing. We’re truly in the thick of a post-COVID world at this point, and traditional beliefs that markets often correct are looking like they mightn’t be so solid any longer.
Without a doubt, we’re still tracking Wall Street, and without a doubt, that’s still a Mag7 story. It’s still true to say a handful of elite American tech stocks, megacaps if you will, are essentially responsible for global stock sentiment (if you accept that when the US sneezes, the world catches a cold.)
But it’s not like equity markets don’t often see high concentrations in whatever sector is ‘hot’ in society at any given time. In many ways, tech companies are just the new oil and railroad companies, if you’re willing to forego narrow market jargon for a broader human view of what stock markets actually do.
In my view, the ASX200 has further to climb, and I think it’s possible we’ll see the XJO hit 10,000 this year.
A risky claim, I know. But hear me out.
While we’re about to head into September, typically a period of selling-off instead of buying-in ahead of the yearly Santa Rally, it’s true to say the post-COVID world is offering distinct challenges to well-established dogmas.
(For instance, consider the ASX didn’t see a Santa Rally last year.)
I think that things have changed, and that during COVID, the way markets participate in equity investments has changed, too. It’s true that lockdowns and stimulus checks gave birth to a new generation of smartphone-savvy, ETF-hungry traders – and with more people able to participate in markets than at any other point in human history, I doubt any kind of historic market crash repeat is structurally feasible.
After all, just look at April 2. The market crashed three-and-a-half-months-ago. Hardly anybody remembers it (not including those who made multi-bags.)
What could have triggered a global dark ages for stocks instead ended up being a 30-day reprieve from record levels, after which, established world markets just…kept going back to clocking new records.
Are these broad-based gains we’re seeing irrational? Probably. Maybe even ‘almost definitely.’
But that doesn’t actually matter, and really, you can argue it’s hardly unusual.
It might even be natural for a grave new world where the breakdown of consensus reality, driven by our digital age of polarisation and truth bubbles, has made impossible any kind of broad psychological harmony in the first place.
If that was ever truly the case at all.
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