Putting local and
international financial
markets into context
Prepared by BT Financial Group for the adviser market
Updated to 31 July 2009
1. Australian share markets – the 1, 10 and 50 year view
2. How have international markets fared?
3. Have we seen the bottom in share markets?
4. A quick look at the different asset classes
5. Simple super strategies
The Australian share market has fallen 10.3% in the
past 12 months…
S&P/ASX 300 Accumulation Index – 12 months to 31 July 2009
105
105
100
100
95
95
90
90
85
85
80
80
75
75
70
70
Series Rebased: 31 July 2008 = 100
65
31 Jul 08
31/07/2008
30 Sep 08
30/09/2008
Source: BT Financial Group, Premium Data
3
30 Nov 08
30/11/2008
31 Jan 09
31/01/2009
31 Mar 09
31/03/2009
31
May 09
31/05/2009
65
31 Jul 09
31/07/2009
…but is still up 117% over the past 10 years
S&P/ASX 300 Accumulation Index – 10 years to 31 July 2009
350
350
300
300
250
250
200
200
150
150
100
100
Series Rebased: 31 July 1999 = 100
50
Jul-99
1/07/1999
Jul-01
1/07/2001
Source: BT Financial Group, Premium Data
4
Jul-03
1/07/2003
Jul-05
1/07/2005
Jul-07
1/07/2007
50
Jul-09
1/07/2009
Volatility can hurt returns in the short-term…
Annual returns of Australian shares (%)
– All Ords / S&P ASX 300 Accumulation Index (since 1956)
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
5
1964
Source: Standard & Poor’s
1962
1960
1958
1956
-40.0%
…but it’s a different picture over the longer term...
Rolling 5-year returns of Australian shares (% annualised)
– All Ords / S&P ASX 300 Accumulation Index (since 1960)
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
6
1966
1964
1962
1960
Source: Standard & Poor’s
...and the longer the better!
Rolling 10-year returns of Australian shares (% annualised)
– All Ords / S&P ASX 300 Accumulation Index (since 1966)
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
7
1972
1970
1968
1966
Source: Standard & Poor’s
2008 was a ‘1 in 50’ year event for the Australian
share market...
All Ords / ASX 300 Accumulation Index – 50 years to 2008
2007
2003
2001
2008
1999
2006
1998
2005
2002
1997
2004
1993
1994
1996
1995
1985
1992
2000
1989
1978
1980
1990
1987
1976
1988
1977
1979
1982
1984
1971
1969
1972
1968
1974
1981
1965
1964
1966
1963
1967
1973
1970
1960
1962
1961
1958
1991
1959
1986
1975
0 to 10
10 to 20
20 to 30
30 to 40
40 to 50
50 to 60
60 to 70
-40 to -30 -30 to -20 -20 to -10 -10 to 0
Source: Standard & Poor’s
1983
...but every period of negative returns is often
followed by increased gains
All Ords / ASX 300 Accumulation Index – 50 years to 2008
2007
2003
2001
2009 YTD
+19.7%
2002
2008
1999
2006
1998
2005
1997
2004
1993
1994
2009
1996
1995
1985
1992
2000
1989
1978
1980
1990
1987
1976
1988
1977
1979
1982
1984
1971
1969
1972
1968
1974
1981
1965
1964
1966
1963
1967
1973
1970
1960
1962
1961
1958
1991
1959
1986
1975
0 to 10
10 to 20
20 to 30
30 to 40
40 to 50
50 to 60
60 to 70
-40 to -30 -30 to -20 -20 to -10 -10 to 0
Source: Standard & Poor’s
1983
1. Australian share markets – the 1, 10 and 50 year view
2. How have international markets fared?
3. Have we seen the bottom in share markets?
4. A quick look at the different asset classes
5. Simple super strategies
The major international markets have also fallen
considerably in the past 12 months
110
110
100
100
90
90
80
80
70
70
60
60
Series Rebased: 31 July 2008 = 100
50
31 Jul 08
31/07/2008
30 Sep 08
30/09/2008
30 Nov 08
30/11/2008
31 Jan 09
31/01/2009
31 Mar 09
31/03/2009
31
May 09
31/05/2009
FTSE 100 (UK) -14.8%, Nikkei 225 (Japan) -22.6%, S&P500 (US) -22.1%, DJ Euro Stoxx 50 (Europe) -21.7%
Source: BT Financial Group, Premium Data
11
50
31 Jul 09
31/07/2009
And it’s no wonder why – the linchpin of the global
economy had its worst year in more than 50 years
The US S&P 500 Index – 50 years to 2008
2006
2007
2004
2003
2005
1988
1999
1994
1986
1998
1993
1979
1996
1997
2000
1992
1972
1983
1995
1990
1987
1971
1982
1991
1981
1984
1968
1976
1989
2001
1977
1978
1965
1967
1985
2002
1973
1969
1970
1964
1963
1980
2008
1974
1966
1962
1960
1959
1961
1975
1958
-40 to -30
-30 to -20
-20 to -10
-10 to 0
0 to 10
10 to 20
20 to 30
30 to 40
40 to 50
Source: Value Square Asset Management, Yale University
1. Australian share markets – the 1, 10 and 50 year view
2. How have international markets fared?
3. Have we seen the bottom in share markets?
4. A quick look at the different asset classes
5. Simple super strategies
We believe we’ve seen the bottom of the ‘bear market’
that started back in 2007
S&P/ASX 300 Accumulation Index – 2 years to 31 July 2009
120
120
High point: 1 November 2007
110
110
100
100
90
90
80
80
70
70
60
60
50
50
Low point: 6 March 2009
Series Rebased: 31 July 2007 = 100
Jul-07
Oct-07
Jan-08
Source: BT Financial Group, Premium Data
14
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
History shows us that bear markets are generally
followed by a lengthy rally
Last five Australian bear markets (S&P/ASX All Ordinaries Index)
Market fall
Length of bear
market
Market rise
Length of market
rally
May 1992 – November 1992
-20%
6 mths
73%
15 mths
February 1994 – October 1994
-23%
10 mths
28%
15 mths
September 1997 – October 1997
-20%
1 mth
31%
6 mths
March 2002 – March 2003
-22%
12 mths
55%
24 mths
November 2007 – March 2009
-51%
16 mths
?
?
Date
Source: BT Financial Group, Australian Securities Exchange
15
The major international markets are also showing
signs of a turnaround
110
110
100
100
90
90
80
80
70
70
60
60
Low point: 6 March 2009
Series Rebased: 31 July 2008 = 100
50
31 Jul 08
31/07/2008
30 Sep 08
30/09/2008
30 Nov 08
30/11/2008
31 Jan 09
31/01/2009
31 Mar 09
31/03/2009
31
May 09
31/05/2009
FTSE 100 (UK), Nikkei 225 (Japan), S&P500 (US), DJ Euro Stoxx 50 (Europe)
Source: BT Financial Group, Premium Data
16
50
31 Jul 09
31/07/2009
1. Australian share markets – the 1, 10 and 50 year view
2. How have international markets fared?
3. Have we seen the bottom in share markets?
4. A quick look at the different asset classes
5. Simple super strategies
Growth assets have been the most affected by the
rise in market volatility in the past year
12 months to 31 July 2009
12 months to 31 July 2008
5.05
7.49
-39.49
Cash
International listed property – hedged
-12.33
-37.67
-37.93
Australian listed property
10.34
8.02
International bonds - hedged
9.22
Australian bonds
5.58
-21.97
International shares - hedged
-12.25
International shares
-11.43
-18.9
Australian shares
-10.3
-16.01
-50
-40
-30
-20
-10
0
10
20
Source: BT Financial Group
While cash saw stronger returns this past year, Aussie
shares still outperform over the long-term
31 July 2009
$24,000
Australian shares
$22,500
$21,000
$19,500
$18,000
Listed property
$16,500
$15,000
Global shares
Australian bonds
$13,500
$12,000
$10,500
$9,000
$7,500
Cash
$6,000
$4,500
$3,000
$1,500
$0
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Note: Accumulated returns based on $1,000 invested in December 1984
Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+
years index, UBS Bank Bill 0+ years
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The Australian dollar has continued to make strong
gains against the US dollar since last October
Australian dollar vs US dollar – 12 months to 31 July 2009
$0.95
$0.95
$0.90
$0.90
$0.85
$0.85
$0.80
$0.80
$0.75
$0.75
$0.70
$0.70
$0.65
$0.65
$0.60
$0.55
31 Jul 08
31/07/2008
30 Sep 08
30/09/2008
Source: BT Financial Group, Premium Data
20
$0.60
Low point: 27 October 2008
30 Nov 08
30/11/2008
31 Jan 09
31/01/2009
31 Mar 09
31/03/2009
31
May 09
31/05/2009
$0.55
31 Jul 09
31/07/2009
1. Australian share markets – the 1, 10 and 50 year view
2. How have international markets fared?
3. Have we seen the bottom in share markets?
4. A quick look at the different asset classes
5. Simple super strategies
You and your super
Simple strategies for the new financial year
Which super investment is right for you?
“… Over the long term, experts agree that higher risk assets – like shares –
should generate a higher return than low risk assets, like cash …”
Patrick Farrell, Head of Investment Solutions, BT Financial Group
“…. If you’re young, you have different requirements to someone
approaching retirement, so it may be a balanced fund isn’t the
best option…” Melanie Evans, Head of Super, BT Financial Group
“ … Investing in the safety of a conservative fund can be a smart
strategy if you’re older and want to protect your super as you approach
retirement. If you still have a substantial amount of time before you
retire, moving to a conservative fund may not be a suitable choice ...”
BT Super Investor newsletter, July 2009
You have a big choice in who manages your super
You
Choose how your super is invested based
on the different investment options offered
within your super fund.
Investment professionals
Invest your super across different types of
asset classes - like shares, property, cash
and bonds - depending on your investment
choices.
The upside of being young: time is on your side
Which is the better strategy?
The 10-year savings plan
At the age of 31 you decide to make a personal contribution of $5,000 into your
super and then add to it at the rate of $1,000 each year – until you turn 40.
Then you stop making contributions and leave your super alone until you retire at
65. Let’s assume that you earn and average of 8% pa after fees and taxes.
The 25-year savings plan
At the age of 41, you decide to put aside $5,000 and add $1,000 each year until
you turn 65 in belief that you will make up for lost time by saving harder over 25
years rather than 10 years.
The upside of being young: time is on your side
Which is the better strategy?
The 10-year savings plan
The 10-year saving plan, in which you will have invested a mere $14,000 – a $5,000
initial contribution then $1,000 a year for nine years – will earn you an additional
$153,972 in your super.
The 25-year savings plan
The 25-year plan, in which you will have invested $29,000 more than twice as much,
earns you considerably less: $98,471.
The moral here is simple. If you start building your super balance sooner, it has the
potential to grow bigger – often with less effort. But if you start later, you may need to
contribute a lot more, just to reach the same level.
Assumptions:
i_Assumes an initial investment of $5,000 into superannuation and then ongoing $1,000 contributions made at the end of each year.
ii_Assumes 0% inflation and 8% per annum average return after fees and taxes.
This scenario has been developed for illustrative purposes only and cannot be relied on as an indication or prediction of future results.
The upside of being young: time is on your side
Get compounding working harder for your super
Here are some of ways that you can take advantage of compounding to grow
your super:
Consolidate your super into one account: the money you save in multiple fees could
stay invested and really help grow your overall super balance.
Add more to your super (if you can): By adding more money to your account each
year - above the 9% you normally receive from your employer – you’ll give your
super the opportunity to grow faster and bigger.
Hold your investment over time: if you sell or switch your investments, you’ll lose
the effect of compounding and may crystallise losses.
This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ and is for general
information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete
description of the matters described. The presentation has been prepared without taking into account any personal
objectives, financial situation or needs. It does not contain and is not to be taken as containing any securities advice or
securities recommendation. Furthermore, it is not intended that it be relied on by recipients for the purpose of making
investment decisions and is not a replacement of the requirement for individual research or professional tax advice. BT
does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this
presentation. Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and
consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage
suffered by the recipient or any other person. Unless otherwise noted, BT is the source of all charts; and all performance
figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges
but exclude the entry fee. It is important to note that past performance is not a reliable indicator of future performance.
This document was accompanied by an oral presentation, and is not a complete record of the discussion held.
No part of this presentation should be used elsewhere without prior consent from the author.
For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney time)
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