Share market returns are a major driver of our superannuation and other investments. When shares do well super account values rise, when they do poorly values fall.

The All-Ordinaries Index of Australian shares hit a new record closing high above 8,300 points on 17^th July. It remains close to that level. Share markets in the US, Britain and several European countries have also set new record highs in recent months and remain near them.

This raises the obvious question of whether there could be a serious fall ahead. Share markets are volatile in nature.

The upcoming corporate reporting season will be a major consideration for Australian share prices. Most companies announce their full financial year results in August and September. We will hear about sales, profits, and usually some comment on their outlook.

In some countries including the US, reporting is quarterly, and that is well underway already. The results to date show slower progress in business but nothing alarming.

The gains in overseas markets in recent months have largely been driven by expectations of interest rate cuts. Sweden, Switzerland and the European Union have already cut rates. Investors are now confident the first rate cut in the US will be in September with a reduction in the UK also close.

The first interest rate cut in Australia is still a good way off. Back in June, when the monthly inflation figure rose again, the chances of an August rate increase rose above fifty per cent. Fortunately they have declined since but remain around twenty per cent.

Inflation has been slower to fall in Australia due to high levels of government spending on things like the NDIS and energy rebates. Excessive pay increases for dock workers have pushed the prices of imports up. Big pay rises for workers on major building sites have boosted the cost of housing.

We won’t see interest rate cuts until next year and when they do come there probably won’t be too many. Current interest rates may not be a long way above normal. Rates are unlikely to return to the extreme lows of 2020 to 2022.

Interest rate reductions will be a positive influence on our economy next year, reducing the cost of borrowing for businesses and consumers. That usually leads to increasing sales, improving company profits and higher share prices.

Some analysts worry about a possible recession ahead. That would occur if interest rates remained too high and slowed the economy too much. That seems unlikely. Weakness in the Chinese economy, our major export customer, is a concern. We also have to hope military conflicts don’t escalate.