Share markets have had a particularly strong run since last October, ever since investors became convinced that interest rates were at their peaks in many countries. The biggest winners have been the big US technology companies. Many major companies worldwide have seen solid share price gains.

That raises the question of whether they can go higher still. Perhaps not, at least for a while. Investors are already expressing the view that some large companies, such as Commonwealth Bank, are priced assuming perfect outcomes, and will probably turn out to be overpriced. 

Better opportunities probably now lie with the less studied smaller companies. Commonwealth Bank shares cost 20 times last year’s profits. Bendigo Bank’s cost 11.5 times profits and Bank of Queensland’s 10.0 times 2023 profits.

A similar pattern can be seen in other industries. Rio Tinto is trading at 12.6 times 2023 profits, Fortescue Metals is at 8.3 times and Mt Gibson Iron 6.4 times profits.  

Asian shares have underperformed and may provide opportunity. The Chinese economy has a big influence on Asian companies. It has been handicapped by major property developer failures and its factories are still not back to full production post-Covid.

The Chinese Government is working hard to provide stimulus and boost its economy. If it succeeds, Asian shares should benefit. They can easily be accessed via managed funds specialising in that area.

Stock market listed property businesses suffered huge falls when Covid boosted working-from-home and shopping-on-line, and especially when interest rates began rising. In recent months they have recovered a lot of their losses but probably still have further to rise.

Infrastructure investments include toll roads, electricity networks, gas and oil pipelines and airports. Many of these were also negatively affected by Covid, and rapidly rising interest rates because their buyers often use borrowings. They haven’t recovered much yet. No doubt they will in time.

One specialised area of the commercial property market in very strong demand is data centres, “cloud storage” facilities. With ever more businesses using cloud storage, rapid growth in software complexity, and coming artificial intelligence applications, this seems sure to continue.

Government policy encourages data storage physically in Australia rather than overseas. Companies like NextDC and Goodman Group are major providers.

Despite the recent strong gains there are still opportunities, and declining interest rates should see favourable economic and market conditions later this year and in 2025.