The S&P/ ASX200 (ASX: XJO) printed a record high of 6,810 points today, after the governor of the RBA, Philip Lowe, told a Sydney lunch party that it could cut cash rates further in the near future.
According to the text of the speech released on the RBA's website, Mr Lowe stated on the economic outlook: "It remains to be seen if future growth in demand will be sufficient to put pressure on the economy's supply capacity and lift inflation in a reasonable timeframe. It is certainly possible that this is the outcome. But if demand growth is not sufficient, the Board is prepared to provide additional support by easing monetary policy further."
Even cheaper money and lower rates on debt are likely to support share market valuations as the bottom line is more liquidity in the financial system should eventually find its way into companies' profits and valuations more generally. In effect stimulating the economy by making cash cheaper should be a positive for the valuations of assets like property and shares.
A couple of poster boys for the lofty valuations of growth shares are software-as-service businesses Wisetech Global Ltd (ASX: WTC) and Pro Medicus Limited (ASX: PME).
They both hit new record highs today and their valuations are up around 90% and 325% over just the past year.
Other popular WAAAX acronymed shares like Appen Ltd (ASX: APX), Xero Limited (ASX: XRO) and Afterpay Touch Group Ltd (ASX: APT) are also all at or near record highs today.
Recently high profile funds management group Forager Funds labelled Pro Medicus shares a definite "bubble", while yesterday another high profile fundie that recently raised more than a $1 billion from retail investors in L1 Capital also launched a blistering attack on the valuation of growth shares in Australia.
