The Australian share market ended October mostly unchanged, with the S&P/ASX 200 Index up 0.4% at 8,881.9 points. The Australian dollar fell 1.1%, now at 65.5 US cents per AUD. The Reserve Bank of Australia kept the Cash Rate at 3.60%, while ongoing inflation has decreased the likelihood of further cuts.
Global markets performed well overall: the US S&P500 gained 2.3%, London FTSE rose 3.9%, Japan's Nikkei soared 16.5%, but Hong Kong's Hang Seng dropped 3.5%.
Concerns about a possible "market bubble" in the United States have grown due to high valuations and concentrated gains in major tech stocks, alongside economic uncertainty. Valuation indicators like the Cyclically Adjusted Price-to-Earnings (CAPE) have reached levels not seen since the dot-com era as shown in the chart below, and the “Magnificent Seven” tech giants are driving a disproportionate share of market gains.
Source: http://www.econ.yale.edu/~shiller/data.htm
Notwithstanding the above, strong earnings growth, especially in tech driven by AI and cloud investments, and potential Federal Reserve rate cuts provide support for asset prices. The United States economy remains resilient, with steady growth and consumer spending.
While market concentration raises risks, it also reflects confidence in successful companies. Current high valuations may be justified by transformative innovation, particularly in AI. Investors should stay cautious but not panic, remaining diversified and informed as, in our view, elevated prices could signal structural change rather than speculation.
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This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation, and investment objectives.