Investors have shrugged off concerns that the earnings of Australia’s largest listed companies are set to decline for a third year in a row, even as the sharemarket sets record after record, a divergence that is stretching valuations and leaving some concerned about a reckoning.

The S&P/ASX 20 Index, which tracks the biggest businesses, is on track for a 1 per cent decline in earnings for this fiscal year when companies begin to report next month. That would follow a 4 per cent fall in the 12 months to the end of June last year, and a 10 per cent decline in 2023, according to market estimates and analysis published by Morningstar’s Lochlan Halloway.