The March coronavirus-induced stock market crash and subsequent bear market was a traumatic time for many investors with capital invested in the share market.
But it was also a time when we saw many ASX shares fall to levels not seen in years – giving patient investors some great buying opportunities, in my opinion.
But in the short time since, the situation has changed dramatically once again. Since 23 March, the S&P/ASX 200 Index (ASX: XJO) has rallied over 20%. Even just today, markets are very happy, with the ASX 200 banking a 1.82% rise (at the time of writing).
So with this rally in ASX shares, is it still worth buying in this market?
Are ASX shares still cheap?
Well, it depends on your viewpoint. If we take the all-time high of 7,199.8 points that the ASX 200 reached in February, ASX shares are still relatively cheap. The ASX 200 is today sitting at around 5,517 points – still a good 23% from this high.
So that's a 23% off sale, right?
Well, the last 2 times the ASX was at this current level prior to 2020 was in December 2018 and November 2016.
Do I think either the global or Australian economies are even close to how healthy they were back then? Absolutely not.
We don't even know yet the full extent that the coronavirus and related shutdowns and lockdowns will impact the economy and thus the earnings of all the major companies in the ASX. It's probably not going to be pretty though.
And on the ASX's current numbers, I'm not convinced this reality is being priced in, even at all.
Take CSL Limited (ASX: CSL), the ASX's largest company. CSL shares are only 3.3% off their all-time high. Yes, CSL is in the healthcare space, but that still seems a little incongruous with what's going on in the global economy, in my opinion.
Ditto with ASX conglomerate Wesfarmers Ltd (ASX: WES). Shares of the company behind Bunnings, Officeworks and Kmart are still trading at a price-to-earnings ratio of 19.83. That tells me that the market isn't expecting too much damage to Wesfarmers' retail-orientated businesses in the next few months! Not a scenario I think is too likely.
Foolish takeaway
So no, I don't think ASX shares are anything close to cheap right now, especially considering the impacts of the coronavirus. Things were different in mid-March, but judging by the prices of blue-chips like CSL and Wesfarmers right now, I don't think anything but the best possible case is being considered by the markets today.
Let's hope that happens!
