Farewell 2009 Financial Year!

It has been memorable to say the least!

• Here is a brief overview of what has happened & how this downturn compares to previous ones:
• Australian shares are going to post a negative return in excess of 20.00%. For the most part, all sectors performed very poorly and no share market around the world was spared.
• January & February in particular, saw fear reach epidemic levels. There was the near meltdown of the global banking systems including the failure of Lehman Brothers.

• The extraordinary moves by the governments & central banks that saw guaranteeing of deposits & trillions of dollars being pumped into the system to prop it up.
• The rebound in the Australian dollar, shares & commodities since March. The Australian share market has recovered well over 20.00% & the US market by even more. Meanwhile, the Australia dollar has been on a rollercoaster ride during 2008-2009 moving from $0.98USD to $0.60USD to $0.80USD.
• With the consensus being that 2010 will see positive global economic growth, the question is: How long until the market reaches the 6,800 level of October 2007?
• If we look at the slide below, supplied by Perennial, we can see that after the crash of 1987, it took 23 quarters or almost 6 years to reach its previous high point.

• Another point worth making is that the average return of the All Ords Accumulation index has been over 10% since 1884. This is a long period! Also note that the current decline has also been matched by the 1929-1930 Great Depression in terms of severity.

• The last slide titled “The Long Road Back” is terrific as it puts a number against the return needed for the market to reach its previously high over various years.

i.e.        In     4 years =        18.60% p.a.
6 years =        12.00% p.a.
8 years =        8.90% p.a.