It's all pretty simple to me really. I think a large chunk of these ''investors'' are either ignoring, or don't understand the underlying shifts happening as we speak. The global economy has just received a huge positive shock from the US. Commodities have been a first-moving beneficiary of this, and Australia is one of the most sensitive countries to these price shifts. Inflation is probably going to slap the RBA hard in the face, and I believe almost everyone is underestimating how quickly it will rise.
The moves in the bond market both here and in the US have been impressive. We shouldn't be so worried about the price of interest rates, but rather the path of interest rates, because overall that's what will kill sentiment.
Interesting stat to leave on. I read that an interest rate rise of 2.5% means the most indebted Aussie households with mortgages would see their repayments rise from 42.3% to 58.3% of their income. It's mind boggling because mortgage rates of 6.5 or 7% really aren't that unreasonable.
