What would it take for the ASX 200 to hit 7,000 again?

What would it take for the ASX 200 Index (ASX: XJO) to hit 7,000 points again, just like it did in February? The ASX banks play a big role.

asx share price resignation represented by man kicking miniature man through the air

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Today, the S&P/ASX 200 Index (ASX: XJO) has reached a new post-March high of 6,562 points. That's 6% higher than where the index was a month ago, 17.6% higher than where it was 6 months ago and 44% higher than the low point we saw on 23 March during the coronavirus-induced market crash. However, it's also 2% below the level the ASX 200 started 2020 at, and 8.5% below the all-time high of 7,162 points it reached in February.

Yes, the ASX 200 has only crossed 7,000 points at one period in its entire history, and that was for a period of fewer than 2 months at the start of this year.

So what would it take for the ASX 200 to go back over 7,000 points?  One might think, due to the effects and maladies from the coronavirus pandemic, that reaching a pre-pandemic stock market high is unfeasible in the current climate.

However, that view could be rendered moot by looking at the United States markets right now. The Dow Jones Industrial Average Index (DJX: .DJI) (one of the benchmark indexes for the US markets) has just made a new high. Not a 2-month or a 6-month high, but an all-time high. On Monday this week, the Dow closed at 29,950 points, a level it has never closed at or above in history, including the 'golden', pre-COVID months of January and February this year.

Why the markets are surging to new highs might be a question for another time, but let's see what would need to happen for the ASX 200 to follow the Dow and make new highs of its own.

How do banks fit into the ASX 200?

The ASX 200 is a market capitalisation-weighted index. This means that the largest companies (by market cap) within the index have the most influence on the index. To illustrate, the ASX 200's largest holding is CSL Limited (ASX: CSL) with a 7.78% weighting. The smallest constituent is Western Areas Ltd (ASX: WSA) with a 0.03% weighting. That means if CSL goes up 2% on any day, it's going to have more of an impact on the ASX 200 than if Western Areas goes up 200%.

Together, the top 10 shares in the ASX 200 make up roughly 43% of the total weighting. Of those top 10, 5 are banks: Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and Macquarie Group Ltd (ASX: MQG).

Together, these ASX bank shares have a collective weighting of 21.4% in the ASX 200. Why is this important? Well, because all 5 of these companies (we might make an exception to Macquarie here), operate in the same industry, in the same market and under the same conditions. The big four especially have an oligopolistic hold on the Australian retail banking market. That, in turn, means the factors that affect one bank's share price are likely to affect them all.

For the ASX 200 to reach 7,000 points, it's likely that the ASX banking sector will need to carry the load, as it were. Remember, last time the ASX 200 was over 7,000 points, the big four were trading with valuations far above what we see today.

Foolish takeaway

Looking at the numbers, a logical conclusion could draw us to this scenario: the only way the ASX 200 is going to go back over 7,000 points is if the ASX banks appreciate considerably, or else the rest of the ASX 200 has an exceptional growth period and picks up the slack.

Should you invest $1,000 in CSL right now?

Before you buy CSL shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and CSL wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Person pretends to types on laptop drawn in sand.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a happy finish to the week for ASX shares this Friday.

Read more »

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A mature age woman with a groovy short haircut and glasses, sits at her computer, pen in hand thinking about information she is seeing on the screen.
Share Market News

ASX shares in April: 8 key takeaways according to Macquarie

Here are eight key takeaways from April, according to a new note from the broker.

Read more »

Woman looking at a phone with stock market bars in the background.
Share Market News

Market outlook: Should I 'sell in May and go away'?

May is the time to sell... If you believe in fairytales.

Read more »

Five young people sit in a row having fun and interacting with their mobile phones.
Share Gainers

5 ASX All Ords stocks rocketing higher this week

Investors sent these five ASX All Ords stocks soaring this week. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Block, Corporate Travel Management, Judo, and Zip shares are sinking today

These shares are missing out on the good times on Friday. But why?

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why Boss Energy, Capstone, Dimerix, and Platinum shares are storming higher today

These shares are having a good finish to the week. Let's find out why.

Read more »

A shocked man holding some documents in the living room.
Broker Notes

Macquarie's take on Judo Capital shares after suddenly falling 19% yesterday?

Judo Bank was the ASX's top-performing banking stock in 2024.

Read more »