Methodology, data and analysis by Logan Wong.
Six data-driven, long-horizon models for the Australian share market — market size versus the economy, earnings multiples, interest rates, trend deviation and the equity-bond trade-off — each scored in standard deviations from its own history and combined into a single aggregate reading. Built on 45+ years of monthly data.
The aggregate reads +0.50, Fairly Valued, broadly steady over the past fortnight. The Australian market is trading close to record highs. The S&P/ASX 200 finished the week at 8,829 on 19 June after touching 8,966 midweek, with the broader S&P/ASX 300 closing at 8,771.
Two models flag stretch. The trailing P/E at 23.3x sits well above its 15.9x long-run average (+1.28), and the dividend yield near 3.0% is historically low (+1.29). Both say price is high against current earnings and payouts. Pulling the other way, the Southern Cross Indicator (market cap to GDP, about 123%) remains well below its long-run uptrend (−0.65), because Australia's market value has not kept pace with the structural rise driven by decades of superannuation inflows. Mean reversion has the index about 8% above trend (+0.59), elevated but short of extreme, and the earnings yield gap is neutral.
Backdrop: the RBA held the cash rate at 4.35% in June, its first pause of 2026 after three hikes, though Governor Bullock kept a hawkish tone and would not rule out further moves. The 10-year bond yield held at 4.83%. Friday brought a sharp pullback in resources, with iron ore soft and BHP off about 5% on a cost overrun at its Jansen potash project, while a more hawkish than expected US Federal Reserve weighed on rate-sensitive names. The May CPI release on 24 June is the next test of whether the RBA can stay on hold.
In one line: fully priced on earnings-based measures, still reasonable on whole-economy and trend measures. A fairly valued market with a mild expensive tilt, neither cheap nor in bubble territory. General information only, not personal advice.
Total ASX market capitalisation as a percentage of nominal GDP, annually 1979–2020 (World Bank) with a live 2026 reading (ASX market cap A$3.63T ÷ annualised GDP A$2.95T ≈ 123%). Scored against a linear trend fitted to the full history — the ratio drifted structurally higher through the 1980s–90s as superannuation deepened Australia's capital markets, so deviation from trend is more meaningful than the raw level.
Market-cap-weighted trailing P/E of the Australian market (All Ordinaries), monthly since 1980. Scored on LN(P/E) versus its long-run average, which damps the distortion of recession-era earnings collapses (1992, 2009, 2020–21 spikes are earnings artefacts, not euphoric pricing).
Australian 10-year government bond yield, monthly since 1980 (OECD via FRED). Low yields mechanically support higher equity valuations; high yields compete with equities for capital. Scored against the modern inflation-targeting era (1995–present): a positive z-score means bonds are a stronger headwind for shares than usual. This model provides context and is not included in the aggregate score.
S&P/ASX 300 monthly closes since 2001 (the index launched April 2000), log scale, versus an exponential trend fitted on
continuously compounded returns — r = LN(Pₐ/Pₐ₋₁) — with ±1σ/±2σ bands. Price index (excludes dividends);
an accumulation-index version is in development.
Equity earnings yield (100 ÷ P/E) minus the 10-year bond yield, monthly since 1980. A wide positive gap means shares pay you substantially more than bonds (cheap); a negative gap means bonds out-yield equity earnings (expensive). Scored inversely: low gap → overvalued.
Market-cap-weighted dividend yield of the Australian market, monthly since 1980 (excluding franking credits). Yield moves inversely to price: a historically low yield signals an expensive market. Scored inversely: low yield → overvalued.
Calendar-year total returns (price + dividends reinvested) of the All Ordinaries Accumulation Index, 1980–2024. The long-run engine behind Australian equity wealth: most years are positive, the average is double-digit, and the worst years cluster around 1981–82, 1990, 2008 and 2022.
Scoring. Every model is reduced to a z-score: how many standard deviations today's reading sits from its own long-run trend or average. Ratings: z > +2 Strongly Overvalued · +1 to +2 Overvalued · −1 to +1 Fairly Valued · −2 to −1 Undervalued · below −2 Strongly Undervalued. The aggregate is the simple average of the five scoreable models (Southern Cross, P/E, Mean Reversion, Earnings Yield Gap, Dividend Yield).
Continuously compounded returns. Trend fitting uses natural-log returns LN(Pₐ/Pₐ₋₁), which are additive across time and
the correct basis for exponential trend regression.
Sources. Market Index (PE, dividend yield, market statistics) · FRED/OECD (10-year yields) · FRED/World Bank (market cap ÷ GDP) · FRED/IMF (nominal GDP) · TradingView (S&P/ASX 300 monthly closes) · All Ordinaries Accumulation data per Vanguard and ASX research. Data retrieved .
Freshness. Index prices and bond yields are current to the latest monthly update; P/E and dividend yield after April 2026 are price-scaled nowcasts pending publication. The aggregate is refreshed monthly.
For general information only. Not personal financial product advice. Past performance is not a reliable indicator of future performance. Logan Wong is a Corporate Authorised Representative of Advisory Circle Pty Ltd AFSL No. 513052. © 2026 Boston Global Wealth Pty Ltd.
