Ten Cap’s chief investment officer, Jason Todd, said the combination of these factors has provided a strong base for the market – securing the continuation of the bull run that began in March 2020.
In fact, Todd argued – despite gaining over 20 per cent since April – the Australian equity market remains in the early stages of a multi-year bull run.
“It’s likely that the next few years will see above average returns even against a backdrop where the market has risen strongly from its April 2025 lows and valuations are already expensive,” Todd said.
“We know we are more bullish than the consensus, but if the RBA delivers on additional rate cuts, consumer spending picks up as real incomes rise and broader cyclical tailwinds become more pronounced, then we outside of a US/global equity sell-off, then investors should expect at least a few more years of decent returns.”
The advance, Todd said, will be led by rotation into cyclicals, small/mid-caps, and rate-sensitive segments, marking a shift away from defensive growth leadership, including banks.
“We think this will mark the start of a more balanced and valuation-aware upswing,” he said.
Todd further pointed to clear markers suggesting market momentum is shifting from large-cap defensives towards small/mid-caps and previously lagging sectors such as industrials, energy and financials – excluding banks.
“We see stronger prospects for domestic cyclicals compared to global cyclicals, given the modest policy stimulus from China and US housing sector weakness. Rotation is occurring with valuation discipline, enhancing the durability of this upswing”.
Speaking on InvestorDaily’s Relative Return Insider podcast, AMP chief economist Shane Oliver said Australia has effectively been in one long bull market since 2020, with only short-lived corrections that never crossed the 20 per cent decline needed to mark a true bear market.
“Well, in some ways, that’s just a truism because a bear market is defined as a 20 per cent or greater correction and we haven’t had one of them since 2020,” Oliver said.
“We had something like a 15 or 16 per cent correction later that year, another in 2022, and one earlier this year of about 14 per cent. But we haven’t had a 20 per cent pullback, so it follows we’ve still been in one long bull market.”
Oliver contrasted Australia’s run with the US, noting that while American markets fell sharply in 2022 and entered a new cycle, Australia has managed to extend the upswing that began five years ago.
He added that the outlook is underpinned by falling inflation, expected interest rate cuts, and the prospect of an earnings rebound after three straight years of contraction.
“At the moment it’s hard to see what will trigger a downturn in Australia,” he said. “There’s no sign of a recession, inflation is trending down and the central bank is cutting rates.
“That suggests more upside, even though the forward PE is around 21 times, which is quite high.”
Oliver added that a return to earnings growth in the coming financial year will provide additional impetus for market growth.
Nevertheless, the chief economist warned that global risks could weigh on Australian equities, noting the US market’s heavy reliance on technology and AI, growing concerns over US public debt, and the potential economic drag from new tariffs
“The risks are probably more global,” he said. “If there’s a change in perceptions in the short term, that could lead to a problem there. Public debt could become an issue again. Trump’s tariffs cause some pain, but maybe that will start to show up more clearly in the economic data.”
Oliver said he expects the market to deliver reasonable returns over the next six to 12 months, though stopped short of supporting Todd’s multi-year forecast.
He added that while the passage of time raises the probability of another downturn, history does show bull markets can persist for long stretches.
“If our last bear market was in 2020, that’s five years ago,” Oliver said.
“As time goes by, the odds of a new one get higher and higher. Although if you go back through history, we have gone through long periods between bear markets. It’s quite conceivable we’ve got a few more years to go yet.”
