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Share markets hit record high, will the ASX follow?

Tristan Harrison
ASX Global Shares

International share markets hit record highs over night, does that mean the All Ordinaries (ASX: XAO) and ASX 200 (ASX: XJO) will follow?

On Thursday (US time) the S&P 500 and NASDAQ both rose to record highs. The reason? Investors think that a trade deal between the US and China is getting even closer.

The ASX usually follows what the American share market does on a day to day basis, so I expect our ASX shares to rise as well.

Tariffs and the trade war have been the only real worry for investors to be concerned about recently, so it wouldn’t surprise me to see markets rise a few more percent if tariffs were removed.

Australia’s economy is quite dependent on a strong global economy because how export focused it is. Just think about some of the ASX’s largest businesses that are reliant on the global economy – which have a sizeable influence on ASX index returns – like BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG), South32 Ltd (ASX: S32), Amcor Plc (ASX: AMC), Brambles Limited (ASX: BXB), Woodside Petroleum Limited (ASX: WPL), Macquarie Group Ltd (ASX: MQG) and so on.

I think it’s a good thing that records are broken as long as valuations aren’t becoming stretched compared to earnings. It’s almost inevitable that share market records will be broken with population growth and inflation adding to revenue each year.

With many of the globally-facing ASX shares close to record highs I don’t think it’s actually a good idea to buy them unless you’re looking for shorter-term opportunities.

Foolish takeaway

To beat the market you either need to stay invested in the best businesses or invest with a (successful) contrarian style compared to the herd. There are still good value opportunities out there, we just need to find them.

The post Share markets hit record high, will the ASX follow? appeared first on Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Amcor Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019