It's been a joyous day for ASX shares and particularly the S&P/ASX 200 Index (ASX: XJO) so far this Tuesday.
The ASX 200 has been on a stunning run for a few months now. It was only back in late October that the ASX 200 was at what was then a new 52-week low of 6,751.3 points. But fast forward to today, and we see that same index at over 7,600 points.
This means that the ASX 200 has gained a whopping 12.3% or so over just three months. That three-month gain well exceeds its annual average return.
What's more, we've seen the ASX 200 hit a new high today. During this morning's trading, the index climbed as high as 7,630.5 points. That exceeds the highest point the ASX 200 has ever closed at (7,628.9 points in August 2021).
However, it is just a tantalising whisker away from the index's real all-time high of 7,632.8 points, which was achieved during intra-day trading in the same month.
At present, investors have cooled a little, with the index sitting at 7,599.8 points, up 0.28% for the day so far.
Saying that, the index got laughably close to this high earlier this month. On 2 January earlier this month, we saw the ASX 200 climb as high as 7,632.7 points – just 0.1 point from that August 2021 high.
Still, we can't deny that this is exciting territory for ASX 200 shares to be exploring.
So what's behind the recent runup for the Australian stock market that is seeing the market attempting to crack these records?
Why are ASX 200 shares at record highs today?
It's difficult to pinpoint exactly why an entire share market might be at or near a new record high. But in this case, here are a few factors we can point to.
Firstly, the US markets are currently at all-time record highs. Just last night (our time), the S&P 500 Index (INDEXSP: .INX) hit an all-time high of 4,929.31 points.
At the same time, the Dow Jones Industrial Average (INDEXDJX: .DJI) also clocked a new record high of 38,343,93 points, while the Nasdaq Composite (INDEXNASDAQ: .IXIC) Index achieved a new 52-week high of 15,630.58 points.
As the financial centre of the world's economy, the US markets often dictate the mood on the ASX. So it was always going to be fertile ground for a new high on the ASX today.
But more broadly, it's likely that the ongoing success of both the US economy and the Australian economy are helping our respective stock markets too.
Across both the US and here at home, the respective central banks seem on track to achieve something that most commentators thought was an unachievable pipedream: cooling rampant inflation while preventing an economic recession.
The Goldilocks zone
In the past, most periods of high inflation have been broken only by rising interest rates sparking an economic contraction.
However, the US Federal Reserve, as well as our own Reserve Bank of Australia, seem to have softly landed the economic plane this time around.
The US economy in particular remains remarkably resilient. Inflation is falling, yet economic growth is robust, and unemployment remains at historic lows. Commodity prices, particularly oil, are also at relatively moderate levels.
What's more, most American and Australian commentators think the next interest rate move will be a cut, rather than a hike. If that isn't enough to elicit new records on the stock market, I don't know what is.
Of course, the rest of 2024 is still unknown. There's a chance that this economic miracle will come back to earth. If it does, we could see the US and Australian share markets retreat.
But equally, if the good economic news continues to flow in, then we could see even higher highs for both the ASX 200 and the S&P 500.
