Tag Archives | Diversification

Australian Market Hits a 5 Year High but still has a long way to go

Yesterday the ASX200 index hit the highest level in the last 5 years when it reached the ‘giddy’ height of 5234. This has been a very hard level for the market to break over the last year, in fact much above 5000 has been hard to maintain since it was first reached back in April 2010. It is also interesting to see how far the market is from getting back to it’s pre Global Financial Crisis highs – it is still 24% below where it reached in 2007.

Graph of ASX200 Index over the last 10 years - Source : IRESS

Graph of ASX200 Index over the last 10 years – Source : IRESS

Compare this to the US market, with the same time period for the S&P500 below. That market has gained back all it lost in the Global Financial Crisis and has gone on to new ‘all-time’ highs.

S&P500 Index for the last 10 Years. Source : IRESS

S&P500 Index for the last 10 Years. Source : IRESS

It is however interesting to note that the ASX 200 Accumulation Index (which includes all the dividends paid to investors) has just reached an all time high gaining back 103% of its losses since 2008. Shows the huge power of the dividend, especially with antipodean markets where it is such a high proportion of returns.

ASX 200 Accumulation Index Last 10 Years. Source : IRESS

ASX 200 Accumulation Index Last 10 Years. Source : IRESS

Even so this highlights the importance of diversification for clients outside of Australia and New Zealand. In fact our current view is that client should be overweight their long term strategic allocation to global equity markets as the improved forecast for global growth over the next couple of years should flow through to good performance in those markets.

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