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Highlights

  • ASX 200 gained 3.6% in April, ending at 8,126.2 points, buoyed by a rebound in bank stocks.

  • Commonwealth Bank surged 10.4%, hitting a new all-time high.

  • Analysts warn CBA shares may be significantly overvalued, with downside risk looming.

Despite significant market turbulence in April, the S&P/ASX 200 Index (ASX: XJO) defied expectations and closed the month on a high, posting a 3.6% gain to finish at 8,126.2 points. A major driver of this performance was the resurgence in the banking sector, particularly the big four banks.

Among the standout performers, Commonwealth Bank of Australia (ASX:CBA) stole the spotlight once again. Australia's largest bank not only outpaced its peers but also soared to a fresh record high during the month—a notable feat in a period marked by global market uncertainty and shifting interest rate expectations.

CBA shares surged 10.4% in April, outperforming both the financial sector and the broader market. Over the past 12 months, CBA shares have climbed nearly 50%, compared to a more modest 7% gain in the ASX 200 Index—both figures excluding dividends.

Market analysts attribute this stellar performance to investors’ flight to perceived safe havens amid global volatility. According to Macquarie, the banking sector has benefitted from this sentiment, with its valuations holding up firmly in recent months.

“Bank valuations held up well in recent months as the sector was perceived as a relative safe haven during a period of global market volatility,” Macquarie stated in a recent note.

However, despite the bullish momentum, not all market watchers are convinced the rally is sustainable. Macquarie has maintained its underperform rating on CBA, warning of significant downside risks, particularly if interest rates fall and lending competition intensifies.

“While we see limited risk in the upcoming reporting season, we believe medium-term earnings risks are skewed to the downside,” the broker noted. “Our current forecasts incorporate 100 basis points of rate cuts and only partly reflect recent moves in yield curves, noting further risk to FY26–27 earnings of approximately 5% to 10% if fixed-income market pricing is correct.”

Macquarie has set a price target of $105.00 on CBA shares, implying a potential decline of over 35% from current levels.