It has been a frustrating period for local investors, who have endured listless sideways trading since May. But the recent break higher for the benchmark S&P/ASX 200 sharemarket index suggests the synchronised global expansion, that has seen Wall Street, the Japanese Topix and the German DAX hit record highs, has arrived on Australian shores.

After last financial year's bumper profits, Australian companies are expanding their business investment plans, buoying the mood among shareholders, said Hasan Tevfik, equity strategist at Credit Suisse.

"There is a newfound corporate confidence in Australia which is permeating through to investors," he said. "The recovery and expansion that we've seen in both China and the United States for the last few years has only come to Australia recently."

Non-mining business investment in Australia increased in the June quarter and was almost 10 per cent higher than at the start of 2016.

Mr Tevfik pointed to an earnings expansion cycle that began in August 2016, which was freeing up cash flow for businesses to expand their operations.

"The average earnings expansion goes on for five years and during these phases the market pushes high," he said. "And we're just starting year two. So there's a way to go yet."

The synchronised global economic upswing that has lifted the spirits of foreign investors is likely to provide further support for Australian equities, given that between 30 per cent and 40 per cent of them earn the bulk of their earnings overseas.

"On top of that, general strong growth, even for companies that aren't directly exposed, will probably benefit," Mr Tevfik said.

6000 and beyond

Close to half the Australian sharemarket's total capitalisation rests in the mining and financials sectors, which means the length and strength of the current rally will rely heavily on those heavyweight portions of the index, JP Morgan equity strategist Jason Steed said.

"To enable much of a move beyond the 6000 mark, we do need a continuation of the earnings upgrades through materials," Mr Steed said. "Materials [earnings] have turned and we need to see them come back up, which we believe will happen. And we would need to see a stronger earnings uplift through the banks and insurers over the course of the next 12 months."

To that end, the coming bank reporting season could be a crucial catalyst for the ASX. Full-year profit results are due from ANZ on October 26, NAB on November 2 and Westpac November 6. CBA holds its annual shareholder meeting on November 16.

"Looking forward to 2018 to argue for a much stronger - say 6500 points [for the ASX 200] theoretically - I don't envisage a scenario where that is price-driven," Mr Steed said.

"If you look at a lot of the gains over the past year outside of Australia - we haven't had a good year - a lot of it has been driven by earnings," he said.

Mr Steed said the roughly 15 per cent gain in the MSCI All-World equity index had been matched by an equivalent expansion in aggregate earnings.

He expected the ASX 200 companies to increase profits on a per-share basis by about 5.5 per cent this financial year. Add in 4.5 per cent in dividend yield and that "gives us 10 per cent return, which is not so bad".

Beyond a strictly earnings-driven market, Mr Steed believes "we need a much better political backdrop" to provide the environment in which investors are prepared to pay more for a given level of earnings. He pointed to the dysfunction in Canberra around crucial policies such as energy and a potential banking royal commission as examples of the "sovereign risk" that weighed on potential investor appetite.

Investors would also need some more clarity around how much of the recent middling earnings growth could be attributed to structural factors - such as increasing competition in the retail and telecommunications spaces - and how much was purely cyclical. Relative valuations may also come into play after the ASX lagged world equity markets.

"We're now around five-year lows against the MSCI All-world [in terms of valuations], so do we see some mean reversion buying? A lot of money is driven by quant strategies, so there might be a flow of money. If we see a slight earnings upgrades and we see those strategies kick in, we might see some money come back in to the sharemarket."