The annual dividend yield is still tragically 2.95%. It is incredible this has happened and investors continue to carry such a high tolerance for a low return. Although our entire share market is overvalued. Xero is part of the ASX 20, has added 30% in the last month has PE ratio of 140. Pro Medicus is up 30% in the past month and is number 22 on the ASX with a PE ratio of 340. Wisetech is another ASX 20 stock with a PE ratio of 160. Companies with big market caps in the ASX 20 do not normally behave like this. No more than a bank should trade on 28 times earnings.
Money is pouring into our market as the sentiment for a 'melt up' is overwhelming. Valuations are stretched as the rising aggregate market cap is vastly ahead of earnings. So if you think the market has now entered a perpetual climb and corrections, recessions, and market crashes are a thing of the past, then why bother about what earnings multiple you enter?
Just look at bitcoin. All the stories in the media are about the climb to 100,000 USD. If your an owner, why sell, and if the price is below 100,000, buy in to ride the wave to 100,000!! Its a self-fulfilling prophecy!!! Bitcoin is going to 100,000 because the collective investment community has told itself its going to $100,000. And when bitcoin hits 100,000 USD, then what?
Same thing is happening with the stock market - too many believe the run is going to carry on and be perpetual. No one is selling, and everyone is buying. Valuation doesn't matter. the definition of a bubble blowing
CBA Price at posting:
$157.78 Sentiment: Sell Disclosure: Not Held
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