When the S&P/ASX 200 Index (ASX: XJO) hit 7,000 points for the first time ever back in January 2020, it caused quite a stir.
Although an arbitrary threshold like 7,000 points has very little real application or value, it still provides an easy rally point for investors' psychology. A similar, although perhaps not quite as large, a stir also happened when the ASX 200 once again finally found 7,000 points back in April.
Following this, the ASX 200 then breached 7,100 points, followed by 7,200 and 7,300, followed finally by 7,400 points over the past few months.
How much higher can it go? That might be what many an investor is asking. Well, one fund manager thinks the runway isn't ending soon. According to a report in the Australian Financial Review (AFR) today, global investment manager Research Affiliates is expecting the ASX 200 to push past 8,000 points by the end of the year, and outperform other global markets to boot.
The source of this optimism? Commodity prices. Here's some of what Mike Aked, director of research at Research Affiliates, had to say:
We would expect that Australian resource companies are much more likely to drive our local market higher over the second half … possibly rising to as high as 8000 given the momentum in commodity prices… Resource companies are well positioned to take this lead as news of domestic and global inflation should continue to rattle markets until the end of 2021.
Miners to push ASX 200 above 8,000 points?
Commodity prices are indeed at record levels. Iron ore is still stubborn above the sky-high US$200 a tonne mark, despite various predictions of a return to 'normal' levels.
Oil is back above US$70 a barrel, and copper prices are also at historical highs. This has pushed the ASX 200's big miners such as BHP Group Ltd (ASX: BHP) to new highs in recent months.
Even gold is remaining resolutely above US$1,700 an ounce. Sure, that's still not at the highs above US$2,000 an ounce that we saw last year. However, it's still very high relative to its (long) history.
Aked is also looking to ASX 200 resources shares as a hedge against the possibility of future inflation, a bugbear for ASX investors. Here's some of what he had to say on that topic:
While we do not know what the remainder of 2021 will bring, investing in a portfolio of cheap resource names that are positioned well for rising inflation seems a more robust investment strategy than investing in expensive financials, which will need continued property price increases to justify their price.
There you go, out with the banks, in with the miners, at least according to Aked. Eight thousand points by the end of the year (or a 9% rise from today's levels)… it's a bold claim. But most ASX investors would probably be pretty happy if it turns out to be right.
