Elevated valuations are the entry price for equity market participation. If you don't want to pay the entry price, then don't invest or look for cheaper pockets within the market. We don't like that valuations are unappealing, but we are pragmatic and we think the cost of not being invested (as an equity fund manager) outweighs the discomfort that high valuations create. Despite valuation concerns, we believe the bull market remains intact. The prospect of policy rate cuts alongside improving consumer spending and should be enough to offset a patchy earnings backdrop. In fact, we think the next few years will see Australia post above average equity market returns - a view we admit is more optimistic than consensus - but not inconsistent with an imporving macro backdrop and a strong desire to buy into risk assets.
