“The ‘yield’ portion of the Australian market has done the heavy lifting, most notably banks. Defensive growth sectors, such as consumer staples and health care, have also done well,” UBS stated in their paper, Australian Equity Strategy: Dissecting The Rally’

The banking giant sees this because of the low rates of yield you get from other asset classes.

“The yields on bonds and retail term deposits are quite low, so there has been a concerted push into equities ... and within that push there has been a push into high yield stocks,” Dean Dusanic, equity strategist at UBS Securities Australia told InvestorWeekly.

Investors have also been shifting within the equity market, from underperforming mining stock to other yielding stocks, however, UBS caution investors from avoiding the mining sector all together.

“Investors in mining stocks have been beaten up recently by the underperformance, but if you get a few months of outperformance, I am sure they will be tempted to go back in,” Mr Dusanic said.

Despite this, UBS believes this does not mean that equities are overvalued.

“We would not use the term that yield stocks are in a bubble yet … but we do cognise that we are in a very low yield environment,” Mr Dusanic said.

The investment house worries if equities can justify further rises.

“Equities valuation is starting to look a little full; we would not argue that they are overvalued, just that they are in line with long-run averages,” Mr Dusanic pointed out.

“They are no longer as dirt cheap as they were a while ago.”