Market Update: 2008 was a 1 in 50 Year Event for the Australian Sharemarket

2008 was the worst year for the Australian Stock Market in 50 years, down 38.9%. Historically though, a negative year is often followed by a year of positive gains.

The Australian share market fell 38.9% in 2008, but as the chart below shows, this was a ‘1 in 50’ year event.

Figure 1. All Ords / ASX 300 Accumulation Index – 50 years to 2008

Source: Standard & Poor’s

The above figure indicates that in the past 50 years, the local market has:

• posted positive annual returns on 37 occasions
• posted annual returns greater than 10% on 32 occasions
• posted only 3 negative annual returns in the past 15 years

When the Australian share market falls, like it did in 2008, it’s often followed by a year of positive gains. For example, in 1982 the market fell 13.9% but followed it up in 1983 with a gain of 66.8%.  Other notable examples are outlined in the table and figure below:

Table 1. All Ords / ASX 300 Accumulation Index in Fall and the Subsequent Recovery Year

Figure 2. All Ords / ASX 300 Accumulation Index – 50 years to 2008

So far in 2009, the Australian share market is up 19.7%, meaning it’s already recouped more than half of last year’s losses. This again reinforces the three keys to sound investing:

1. Diversify your investments between the major asset classes
2. Invest into quality, whether it be shares, property or fixed interest
3. review your investment strategy on a regular basis

Presentation by BT Financial Group, dated 15/09/2009

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

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