U.S. interest rates are pretty close to the top. By year- end it is quite likely the Fed will be shifting toward easing monetary policy and investors will be starting to wonder about a renewed widening in the Australian and U.S. interest-rate gap.

The fact that Australian shares are now trading on a similar pe to global shares does not indicate that they are overvalued or that global shares now offer better return prospects.

So on this basis, and thanks to very strong earnings growth, the Australian share market is still cheap.

An upside risk for Australian shares though is that a bubble forms on the back of enthusiasm for China and resources stocks.