$2 PARTY, page-8500

ZIP swims against the tide, volume was similar to last Tuesday, but the signs of the market being overpriced are all there............at least in the businesses that are reporting profits. Maybe the ones that don't can't downgrade so they are immune lol

The slump in Australia’s sharemarket from near record levels could be the start of a much bigger sell down with market pundits warning that investors are too optimistic on both interest rates and company earnings.While the S&P/ASX 200 Index dropped as much as 1.5 per cent on Tuesday after a robust US jobs report tempered US rate cut hopes and the far right made big advances in the European elections, the gauge last week soared 2 per cent – its best weekly performance this year – to trade within 50 points shy of its record high set in March.

That’s despite bond markets implying just a 30 per cent chance of a rate cut by the Reserve Bank of Australia this year. And while traders no longer expect another rate hike from the RBA this year, the first rate relief is not fully priced in until July next year.

That reality isn’t being reflected in stock valuations, according to Barrenjoey’s chief equity strategist Damien Boey. Under the bonnet, businesses are still grappling with elevated labour costs and non-existent productivity growth, a toxic combination for profit margins.