It comes just days after some of the country's most bearish investment experts warned baby boomers their retirement savings were at risk with asset bubbles about to burst.

Highly regarded Australian Ethical Investment portfolio manager Mason Willoughby-Thomas warns "the risk of capital loss once monetary conditions eventually normalise could be significant as investors rush for the door en masse."

"Economic fundamentals are offering limited justification for surging share prices. Rising unemployment, falling business investment, stalling inflation, weak confidence, a decade of dysfunctional government and inconsistent policy are weighing on confidence and restricting much-needed investment for growth," he said.

Mathan Somasundaram, a Baillieu Holst equity analyst and author of market newsletter Sunset Strip, is comparing current conditions to what happened prior to the 1987 stock market crash and the GFC, which saw the sharemarket nearly halve in value.

"If you look at the market forward PE (price-to-earnings) series since 1986, any PE expansion above 15 has not ended well," he said. The current PE is around 15 times earnings compared to a historical average of 14 times, as shown in this graph:

The comments come a day after the Reserve Bank of Australia kept the official cash rate on hold at 2.25 per cent, opting for a wait-and-see approach on the economy's sluggish performance in the wake of the last February rate cut.

Australia's S&P/ASX 200 index fell by 25 points or 0.4 per cent to 5933 points on Tuesday, dashing hopes that further gains would see the market break through 6000 points and test a post-GFC high.

IG Markets strategist Evan Lucas said Tuesday's share market sell-off was just a taste of how savage the response could be once investors get a whiff of higher interest rates.

"The unwind in the yield trade will be very quick and very violent as institutional investors dump the risk from the overcrowded equity trade and return to normal portfolio distributions across the asset classes," he said in a note to investors.

The hunt for yield has pushed shares in Commonwealth Bank of Australia and Telstra above fair value, he explained.

"CBA is trading over 1 standard deviation away from its mean price-to-earnings ratio, while Telstra is trading at 18 times earnings, and also has a new CEO and a dividend yield that is thin for a company growing at just on 2 to 3 per cent. Investors are ignoring all of this and continue to buy these names as payouts ratios are large and getting larger," he said.

The RBA's decision to keep rates on hold has fuelled bets of a rate cut to 2 per cent in either April or May. It's hoped that doing so will put pressure on the local currency, spur business activity and encourage consumer spending - outside of the property market.

Lower rates are also pushing median house prices in Sydney, Melbourne and certain mining towns to fresh highs.

Pete Wargent, property buyer and co-founder of AllenWargent property buyers, said any further gains in popular property areas would push the market well and truly into unchartered territory.

"If you are buying at this point in time, the expectation of any future gains is limited, depending on which sector of the market you are buying into. For buyers who are getting involved in auction frenzies, there is realistically a real threat that some of these gains could be reversed.

"I don't think interest rates will be what stops this property boom in parts of Sydney, Melbourne and resource rich mining towns. I think the property boom will die of old age when rental yields fall so low that investors start  to question whether they stack up," he said.

Mr Somasundaram added that the difference between now and previous big share market corrections is that we are fast running out of buffers to protect investors should they get fearful.

"If [the] RBA cuts rates down below 2 per cent in the near future and our currency gets down to low US70¢s, what happens when we have a Euro meltdown or Japan recession or China hard landing? We are driving very fast without seat belts. Once we use up these buffers and are sitting on asset bubbles, any macro headwind will hammer us even harder than the GFC," said Mr Somasundaram.

The Australian stock market with its heavy weighting to stable sources of dividend income and capital growth such as the big four banks and Telstra as well as a well-developed listed real estate and high quality utilities has been a beacon for yield hunters.

"Certainly, ultra-cheap money should provide a strong incentive to invest for growth and provide the underpinnings for stronger valuations, however across a lot of our universe this is not happening and shares are simply rising on earnings-multiple expansion and yield compression. This creates an inherently more risky investment environment," said Mr Willoughby-Thomas.

But higher prices are falling out of sync with the earnings expectations of certain stocks and expected rental yields in popular property, making them harder to justify.

"We are once again experiencing PE expansion, but this time it's driven by central bank action to keep a low interest rate environment. Any change to the market expectations of the rate cycle will see substantial pullbacks," said Mr Somasundaram.

In the absence of a March RBA rate cut, investors will now look closely at the central bank's outlook statement before deciding whether to keep selling or buy.

"If they say they are going to wait and see what happens with global macro in the next month or so, which is what they should do, then we will see some profit taking. If they say they are keeping rates stable for a while, then we will see decent sell-off," he warned.