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Market volatility and its impact on Australian and international share markets.

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Presentation on theme: "Market volatility and its impact on Australian and international share markets."— Presentation transcript:

1 Market volatility and its impact on Australian and international share markets

2 1.What’s contributing to current market volatility? 2.How has volatility affected the Australian market? 3.A quick look at international markets 4. What this means for Australian investors 5.Volatility in perspective

3 High inflationA worsening of the global ‘credit crunch’ Deterioration of US & global financial systems Market volatility Increasing fears of a global recession Many factors contributing to ongoing volatility

4 The global ‘credit crunch’ has worsened, with some major US and global financial institutions faltering The outlook for global growth has deteriorated and there are now genuine fears the global economy is headed for a recession The global ‘credit crunch’ takes hold High inflation is still a concern for the world’s central banks, particularly as they struggle to stimulate economic growth.

5 5.Volatility in perspective 3.A quick look at international markets 1.What’s contributing to current market volatility? 2.How has volatility affected the Australian market? 4. What this means for Australian investors

6 Rising market volatility has seen the Australian share market fall 33% in the past year S&P/ASX 300 Accumulation Index – 12 months to 30 September 2008

7 …but it remains at elevated levels over the long-term, up 174% over the last 10 years! S&P/ASX 300 Accumulation Index – 10 years to 30 September 2008

8 5.Volatility in perspective 3.A quick look at international markets 1.What’s contributing to current market volatility? 2.How has volatility affected the Australian market? 4. What this means for Australian investors

9 Market volatility has affected all markets, not just our own… Major international markets – 12 months to 30 September 2008 DJ Euro Stoxx 50 (Europe) (-30.7%) Nikkei 225 (Japan) (-32.9%) S&P500 (US) (-23.6%) FTSE 100 (UK) (-24.2%)

10 The global share market has fallen over 19% in the past year… Global share markets – 12 months to 30 September 2008

11 5.Volatility in perspective 3.A quick look at international markets 1.What’s contributing to current market volatility? 2.How has volatility affected the Australian market? 4. What does this means for Australian investors?

12 What does all this mean for Australian investors? From a valuation perspective, recent market declines are bringing some asset classes back to attractive levels We could begin to see signs of better market performance early in 2009 Market volatility is expected to continue. Most asset classes other than cash look set to post a negative return this year The Australian economy is likely to slow, reflecting conditions in the US and Europe. It has, however, held up well compared to its global counterparts

13 What about the longer-term outlook? Global economic outlook remains uncertain Global growth will continue to slow with the possibility of a lengthy recession Outlook for Australian economy is a little better, supported by a healthy government surplus, ongoing commodities demand from China and India, RBA’s move to lower interest

14 5.Volatility in perspective 3.A quick look at international markets 1.What’s contributing to current market volatility? 2.How has volatility affected the Australian market? 4. What this means for Australian investors

15 Growth assets delivered strong returns last year, however, most affected by volatility this year…

16 Volatility can hurt returns in the short term… Annual returns of Australian shares (%) – All Ords / ASX S&P Accumulation Index (since 1956)

17 …but it’s a different picture over the longer term Rolling 5 year returns of Australian shares (% annualised) – All Ords / ASX S&P Accumulation Index (since 1960)

18 And the longer the better! Rolling 10 year returns of Australian shares (% annualised) – All Ords / S&P Accumulation Index (since 1965)


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