Chart of the week: How unattractive is the Aussie equity market?

The Chart of the Week looks at Morningstar's stock valuations for the Australian market and how it compares to the past.

Shani Jayamanne

06 February 2025

This week's chart comes from Lochlan Halloway's weekly insights to Morningstar subscribers.

The report shows that local markets are on of the most richly priced across Morningstar's global coverage list, even surpassing the US.

Lochlan advises investors that it is not a call to divest from the Australian market. The valuations are skewed heavily by a few expensive companies, including the major banks and market darlings such as Wesfarmers and Goodman Group. There's still opportunities to be found. Five of the largest 20 stocks on the ASX are currently trading below fair value.

He provides context to today's markets. The equity research databased that we have holds 15 years of ratings for ASX-listed stocks. During this time, we’ve seen all sorts of markets: a mining boom and bust, the rise of Trump, the US-China trade war, a war in Europe, a pandemic, an inflation surge, and so on. In short, we’ve got a reasonable sample against which to benchmark today’s market. Lochlan has plotted the aggregate price/fair value ratio for the ASX 200 over the last 10 years.

Today's market isn't completely unprecedented - we saw similar frothy markets post-pandemic period.

The rest of the report focuses on what valuations suggest about future returns, and is available to Morningstar Investor subscribers.

You're able to find an up to date valuation for each market under our coverage in our Markets Centre.

Get more insights from Morningstar in your inbox

More Charts:

APPLE NEWS

AUSTRALIAN EQUITIES

CHART OF THE WEEK

EQUITY

MARKET

AUTHOR

Shani Jayamanne
is a Senior Investment Specialist, Individual Investor, Morningstar Australia.

© 2025 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This report has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or New Zealand wholesale clients of Morningstar Research Ltd, subsidiaries of Morningstar, Inc. Any general advice has been provided without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide at www.morningstar.com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782.