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 19 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) 28
© Copyright 2024