By all measures, the Australian stock market has had a fantastic year over 2024 so far. Year to date, the S&P/ASX 200 Index (ASX: XJO) has risen by 7.85%, which is a great innings for ASX shares by historical standards.
What's more, we've also seen the ASX 200 hit several new all-time highs this year. After first crossing the 8,000-point threshold for the first time ever back in August, the ASX hasn't looked back, with the current record now standing at 8,3845 points.
However, given that the American markets exploded higher, setting new records, following yesterday's American elections, many ASX investors might wonder whether ASX shares could skyrocket even higher.
Today, let's discuss how likely that might be.
Is the Aussie stock market set to skyrocket even higher?
First, it's important to note that neither I nor anybody else has any idea what the markets might do tomorrow, next week, or next year. The markets can move up or down for any number of reasons, and not all of them are logical or rational. As such, making predictions on what might or might not happen going forward is a highly fallible endeavour.
But we'll persist regardless.
Unfortunately, I see few catalysts remaining that could meaningfully raise the Aussie stock market from its current levels.
The ASX 200 is dominated by the big four ASX banks, which together make up four of the six largest holdings right now.
The big four banks' share prices have exploded higher over the past 12 months or so, which largely accounts for the ASX 200's impressive performance. Despite these gains, however, their recent earnings have been mediocre.
Back in August, Commonwealth Bank of Australia (ASX: CBA) reported lower profits for its 2024 financial year compared to FY2023. Just today, National Australia Bank Ltd (ASX: NAB) revealed a similar story.
If the banks' profits aren't growing, it's optimistic, in my view anyway, to think their share prices will.
US election unlikely to benefit the ASX
Additionally, we have to consider why the US markets are reacting positively to Donald Trump's reelection. Two of Trump's core election promises are a significant reduction in the American corporate tax rate and the imposition of higher tariffs on imports entering the US economy.
A lower American tax rate for companies will only benefit US stocks, not ones domiciled in Australia. In fact, it may even hurt the Australian economy, given our corporate tax rate is already far higher than what American companies face. As such, I don't see too much upside for ASX shares if this tax cut is indeed carried out.
Meanwhile, American tariffs don't bring good news for the Australian economy either. Australia could get lucky and, as a US ally, receive an exemption from some or all of these tariffs. But even so, conventional economic wisdom dictates that tariffs are harmful to global trade and, thus, economic growth.
China will almost certainly not gain any favourable treatment from any tariffs, and a slower Chinese economy doesn't exactly bode well for the Aussie share market either.
Putting all of these factors together, it is hard (at least for this writer) to see ASX shares move meaningfully higher from here. Of course, I could be wrong. But that's how the landscape is looking to me.
