The S&P/ASX 200 Index (ASX: XJO) set a new record-high closing price this afternoon. A strong showing from oil producers, miners, and property groups has propelled the index into unexplored heights.
At such a milestone, it’s worth looking at the path taken. How have we arrived at this destination despite the headwinds? Most importantly, where might we be going next?
Banks and miners tow the ASX line
This time a year ago, we had overcome the first wave of coronavirus cases. The ASX 200 was also amidst a recovery – having bounced from 4,816 points to 5,755.
Tech shares were having their moment in the spotlight during an unprecedented ‘working from home’ phenomenon. Over the following months, record government stimulus was administered to avoid a deepened recession.
Infrastructure was an easy target to stimulate the economy. The Australian Government announced a $1.5 billion infrastructure stimulus package for shovel ready projects that could commence within 6 months. Unsurprisingly, ASX-listed miners began to diverge from the broader market.
Furthermore, the government’s Jobkeeper and Jobseeker payments supported continued consumer spending. From August 2020, consumer discretionary shares started to outpace the ASX 200. A great example of this is Eagers Automotive Ltd (ASX: APE), which benefitted from elevated car sales, increasing 129% in the last year.
However, the banks and miners have been the heavy lifters in more recent months. In early May, the big four all reported a bounce back from the prior quarter.
The results acted as an indicator that the worst might be over. Since then, shares in Commonwealth Bank of Australia (ASX: CBA) have rallied to surpass the monumental $100 mark.
But we can’t forget the mining giants. An insatiable desire for resources such as iron ore, lithium, and copper has been like rocket fuel to some of the ASX 200’s largest companies. Fortescue Metals Group Ltd (ASX: FMG), BHP Group Ltd (ASX: BHP), Pilbara Minerals Ltd (ASX: PLS), and OZ Minerals Ltd (ASX: OZL) are just a few that have enjoyed the boom.
ASX 200: To 8,000 and beyond?
Some market commentators are optimistic after the Australian Bureau of Statistics (ABS) released GDP figures for the March quarter. An increase of 1.8% in GDP compared to the prior quarter and strong iron ore prices have VanEck’s Russel Chesler forecasting further highs to come.
Robust growth in company earnings will support equity valuations and the S&P/ASX 200 is likely to rise to 8,000 this year and local shares could outperform the US share market. We are seeing Australian shares trade around record highs, led by gains for the big miners BHP Billiton and Rio Tinto.
If the ASX 200 manages to reach 8,000 points, that would represent a 66% gain from the low set during the COVID crash.