Local sharemarket poised for further growth

The domestic sharemarket is on track to open higher, with benefits ahead from the US economic outlook, despite already high valuations.

The local sharemarket is on track for a positive start to the week, extending a post-US election rally propelled in part by anticipation of President-elect Donald Trump’s economic growth agenda.

Futures markets were pointing to a rise on the S&P/ASX 200 Index of around 0.6 per cent, to 8472 points, at the start of trade on Monday, after putting on 1.7 per cent last week.

AMP deputy chief economist Diana Mousina said US and Australian sharemarkets would benefit from the US economic outlook, despite already high valuations.

“Against a backdrop of geopolitical risk and noise, high valuations for shares and an eroding equity risk premium, there is positive momentum underpinning sharemarkets for now including the “goldilocks” economic backdrop, the global bank central cutting cycle, positive earnings growth and expectations of US fiscal spending,” Ms Mousina said.

Bitcoin would be in the spotlight amid this week, with the crypto currency close to breaching $US100,000 amid expectations for a crypto-favourable US administration, she added.

And sharemarkets would likely keep looking through modestly rising oil prices unless there was a major escalation in the Russia-Ukraine war, such as a ground attack into Russia.

Brent crude was priced at $US75.17 a barrel, up 1.4 per cent, at the close of US trade.

On Wall Street, the Dow Jones rose to a new record high Friday night. It piled on 1 per cent to end at 44,296.51 points, narrowly overtaking a record set earlier this month.

Meanwhile the benchmark S&P 500 climbed 0.4 per cent to 5,969.34, while the tech-rich Nasdaq Composite Index added 0.2 per cent to 19,003.65.

For the week, the S&P 500 Index put on 1.7 per cent, to be up 25 per cent for the calendar year to date.

Major indices have been at or near record territory since the US elections, with investors betting that Trump’s program of tax cuts and regulatory scale-back would more than offset the drag from expected tariff increases.

Cresset Capital Management chief investment officer Jack Ablin said: “The trading for most of this [past] week has been influenced by the growth agenda.”

US market watchers were also cheered in the past week by a broadening of the rally beyond the tech names that dominated earlier in the year.

Analysts have also noted the year-end period is typically a seasonally strong stretch for equities.

However, the US Federal Reserve said on Friday that small businesses in the United States are facing the twin challenges of tighter credit availability and the rising inability to pay back loans.

While overall vulnerabilities from business and household debt remained “moderate,” some areas are in better shape than others, the US central bank said in its semi-annual financial stability report.

Delinquency rates, or the ability to repay loans, “rose from the historically low levels reached in spring 2022 to above their pre-pandemic levels,” the Fed said, while there was a deterioration in the quality of both short – and long-term credit availability.

Elsewhere, the Fed noted that valuation pressures “remained elevated in a range of markets, including those for equity, corporate debt and residential real estate.” It also voiced concern about the dangers of so-called stablecoins — digital assets designed to hold their value relative to other assets — which have seen substantial growth since April.

The Fed also reiterated concerns about the impact of office vacancy rates on the commercial real estate sector.

In the week ahead, The Federal Reserve will release minutes from its November 6-7 policy meeting.

Investors will watch for clues about whether the Fed will cut rates at a third straight meeting in December.

Locally, consumer price index October is due for release on Wednesday, with market expectations centring on a headline rise of 2.3 per cent year-on-year, up from 2.1 per cent in September.

The Australian Bureau of Statistics will release private sector credit data due on Thursday.

Additional reporting: AFP