Already high price-earnings valuations, concern over the level of earnings growth outside of resources and the unusually low volatility of the ASX200 are some of the hurdles likely to challenge the market in the next three months.

The benchmark ASX200 index rose a healthy 3.5 per cent in the first three months of the year, a rate of growth that if repeated would lead the index well above the 6000 level by the end of June and to yearly growth of 14.8 per cent.

But few expect growth to continue as strongly in the next three quarters. Given the market's already strong growth, coming despite patchy corporate earnings, it'll take some unexpected good news for the market to match the first quarter's growth.

And while a number of key political events are happening this quarter – elections in France, a Chinese state visit to the US, unending speculation on the likely success of US President Donald Trump in passing his tax agenda – they won't be what drives the ASX.

"I think we are less and less focused on Trump, and less and less focused around offshore political events," Bennelong Australian Equity Partners' investment director Julian Beaumont said

Instead, he expects earnings per share growth and economic concerns to drive the local sharemarket.

"The market will soon start to look ahead to next financial year's earnings," he said.

"The market will need to believe there is reasonable earnings growth coming for further market climbs to gain support from here.

"At the aggregate level, earnings growth will turn on commodity price forecasts, but the market will become increasingly preoccupied with growth in non-resource sectors. There are few sectors showing promise, but overall the domestic economy is bumbling along."

Looking offshore

Outside the resource sector, the earnings picture is "average", noted Deutsche Bank's Tim Baker and Joseph Kim.

"Analysts expect 7 per cent growth this year and next. That's a little above the long-run average of 5 per cent, but with the usual over-optimism the numbers are likely to come down a touch," they wrote at the end of last week.

Meanwhile, surging commodity prices may have boosted earnings and dividends to resource stocks. But this isn't providing a whole-of-economy boost, Mr Baker and Mr Kim said.

"The domestic backdrop doesn't excite us – the income boost from commodity prices isn't spreading through the economy and consumer spending growth is well below average."

Because of this, "offshore exposure looks more attractive".

The global economy is largely being characterised by increasing inflation, growth and interest rates – three factors that have, for now, not been seen in Australia. Relative to earnings, Australian stocks are now expensive compared to those in Europe, Japan and in emerging markets, said JP Morgan global market strategist Kerry Craig.

Of major markets, only Wall Street is more expensive, on 17.6 times price-earnings (on a 12-month forward earnings basis) compared to Australia's 16.5. Europe, Japan and emerging markets have average price-earnings ratios of 15.1, 13.9 and 1.6 respectively.

"The better global backdrop is helpful for the market here", he said. The banks and miners are both somewhat exposed to this global growth narrative, more directly than many other sectors, he said.

"Still, diversification in this market is crucial, and thinking internationally is part of that."

Mr Beaumont noted a number of investors, particularly institutional ones, who have been growing increasingly wary of the price-earnings valuations in the Australian market.

"They've been negative for some time," he said.

Despite growing concerns, the bears have yet to cause any major sell-offs.

Little movement

Bank stocks, he added, are likely to hold their recent gains in the near term. This is helpful for the index given they amount to a third of its market capitalisation.

"The broader market seems to have gained confidence after each time the bears have cried wolf on the banking sector, and the current conditions suggest it's unlikely the chickens will come home to roost in the near term," Mr Beaumont said.

The banking sector tends to do well in April ahead of its May earnings season, buoying the broader index – the ASX200 has risen strongly in four of the last five Aprils.

Another feature of the first quarter has been the remarkably low volatility of the ASX200. Since 2000, the index has moved, on average, more than 1 per cent up or down 56 times a year.

So far this year, there have only been four days when the market has moved by more than 1 per cent.

"Our base case is that equity markets should go higher," said Mr Craig. But he doesn't believe the low volatility will last.

"It's not going to be a smooth ride for investors. Every year, the market experiences big drops. Every year, there are pull-backs. That's a very normal part of investing.

"What's the market gonna do? It could go higher. But it won't do it in a straight line."