The Australian share market ended the 2017 financial year positively with the S&P/ASX 200 rising 9.3% to finish at 5,721 points. This gain was delivered against a better global backdrop combined with higher corporate earnings.
The Australian share market is currently valued on a forward consensus price earnings ratio of 15.2x, which is 5.6% above the long term average of 14.4x. The forward looking dividend yield for the Australian share market remains attractive at 4.6% (80% franked) — or 6.2% grossed-up. This continues to attract investors searching for yield as this dividend yield is substantially above the current 90-day bank bill rate of 1.70%, the 12-month term deposit rates of around 2.40% and the 10-year bond yield of 2.60%. In this regard, we continue to favour higher yielding asset classes when constructing and reviewing client portfolio’s.
Shares are vulnerable to a further short term setback as we go through the seasonally weak September quarter. However, valuations remain mostly okay – particularly outside of the US, global monetary conditions are set to remain easy and profits are improving on the back of stronger global growth, so we continue to see the broad 6-12 month trend in shares remaining up.
Please click here to view the current AMP Capital Market Update which addresses these areas in more detail.