Trending On Livewire: Weekend Edition - Saturday 16th August
ASX hits fresh highs in reporting season as strong results lift markets, rate cuts land and lithium rebounds.
Good morning,
Reporting season is up and running and as Henry Jennings told Livewire’s Chris Conway, the name of the game this year is “do not disappoint”.
Big expectations demanded big results, while outperformance was rewarded.
Simply meeting expectations didn’t cut it.
It certainly wasn’t enough to save CBA (-5%), JB Hi-Fi (-9.7%) and QBE (-8.7%), all of which sold-off on broadly in-line results.
Of course, that didn’t stop the ASX 200 hitting record highs, passing 8,900 points for the first time late this week. Strong results from Westpac, Pro Medicus, Origin Energy and others showed there’s strength across miners, banks and even growth stocks.
And after a shock hold last month, another RBA rate cut finally arrived on Tuesday, but things remain finely balanced in the ongoing battle with inflation and growth.
Elsewhere, US stocks shrugged off hot inflation numbers to also hit new highs, European stocks followed suit and Bitcoin briefly hit a new all-time high before retracing.
Even lithium stocks have managed to mount a recovery after news from China suggested supply cuts are coming. Mineral Resources and Pilbara Minerals are now both up more than 30% over the last month.
If there’s any uneasiness around elevated valuations, the markets are doing a good job of hiding it.
And with markets overwhelmingly expecting a US Fed rate cut in September, the party might not be over yet. Just don’t mention the b-word (bubble).
Have a great weekend.
Tom Stelzer, Content Editor, Livewire Markets
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Markets have come full circle since December, despite a wild ride in between. In this mid-year update, Ben Clark from TMS Private Wealth shares why valuations remain stretched, where he sees genuine opportunities, and the risks lurking in Australia’s concentrated market. We also revisit my SMSF to discuss recent changes and explore Ben’s framework for understanding private equity - from venture capital to infrastructure. This is the follow-up to our January conversation and is packed with insights for investors looking to diversify and smooth returns. Click below to watch the interview or read a summary.
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Chart of the Week: ASX 200 flashes “overvalued” warning
Last week, it was the Buffett Indicator; this week, another red flag is waving. The Macquarie Market PER – a blended trailing and forward P/E ratio for the ASX - has climbed to 20.3x, its highest on record and above the 20x threshold often linked to overvaluation, notes my esteemed colleague Carl Capolingua. The forward reading is close behind at 19.8x, well above the “fair value” benchmark of 15x. The surge implies prices have run ahead of earnings, leaving little room for disappointment. Historically, PER peaks often precede pullbacks, while dips toward 15x have signalled strong buying opportunities. The Macquarie PER isn’t infallible, but it’s a respected valuation gauge. And right now, it’s warning that without continued earnings momentum, the market could be vulnerable to a correction.
Vishal Teckchandani, Senior Editor, Livewire Markets
Weekly Poll
The ASX 200 hit a record high during August reporting season, even as the Macquarie Market PER climbed to a record. What’s next?a) Higher – earnings momentum will keep driving gains
b) Flat – we’re due for consolidation after a strong run
c) Lower – valuations are too high, a pullback is likely
d) Not sure – waiting for more results before deciding
LAST WEEKS POLL RESULTS
We asked "With the Buffett Indicator now above dotcom and COVID-era highs, history suggests this could be “playing with fire.” Where do you stand?"
The poll shows 68% said they were somewhat concerned but staying invested, 16% said they were rotating into value or defensive stocks, 11% said they were selling equities and moving to cash, and 5% said they were not concerned.
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