The benchmark S&P/ASX 200 is now less than 15 points away from the 7000 level, continuing to grind higher as the session has progressed. But does the actual number matter mean anything?
Chris Weston, head of research at Pepperstone, isn’t convinced it’s all that important, suggesting it’s what’s driving the push towards the figure that’s more interesting.
“Talk of 7000 is all the rage on the floor, although it is merely semantics at play,” he said. “Central bank liquidity, further evidence of stability in the economic data trends, a solid bid in emerging market assets amid subdued implied volatility and tight credit spreads, has seen further signs that investors see the local market is gravitating to the new big figure – 7.”
Despite all those factors helping the local market push higher, Mr Weston is concerned the market may already be priced for perfection.
“We have hit 18 times forward earnings, which is as expensive as we have seen historically, so when the market hears something that changes the aforementioned dynamics then it will cause a violent move lower, as there is little room for disappointment.”
However, for the moment, he concedes the trend is “onwards and upwards”.