FAREWELL 2013, HELLO 2014 « ROGER MONTGOMERY.
The Australian market, excluding reinvestment of dividends, rose 14.8 per cent in the year to 31 December 2013, from 4,664.6 to 5,353.1. The vast bulk of this gain came in the December 2013 half-year, and reflected the rally in many international markets coupled with the record low cash rate of 2.5 per cent and the declining Australian Dollar.
In the June 2013 half-year, the market only rose 2.4 per cent and was characterised by weak commodity prices, some severe earnings downgrades and rising bond yields.
For the year to 31 December 2013, the US S&P 500 rose 29.6 per cent to a record high of 1,848.4 – the largest annual increase since 1997. The Japanese Nikkei 225, up 56.7 per cent to 16,291.3, recorded its largest annual increase since 1972. Meanwhile, the Shanghai Composite Index continued its poor performance – down 6.7 per cent to 2,116; 65 per cent below its record high of 6,124 back in late 2007.
China’s shadow banking system, for which there is no asset quality information, received a lot of negative attention, while Fitch Ratings’ Charlene Chu claims China’s “credit-driven growth model is clearly falling apart”.
Despite this, iron ore rallied 12.9 per cent in the December 2013 half-year to US$131/tonne, while Copper recovered by 11.5 per cent to US$3.40/lb. The Gold price had its the worst annual decline since 1981; down 28.3 per cent to $1,202.30/oz, however, much of this decline took place in the June 2013 half-year.
Ten-year bonds performed poorly, as the global economic recovery gathered pace. The yield on Australian ten-year bonds increased by 0.97 per cent to 4.24 per cent, while the yield on US bonds increased by 1.28 per cent to 3.04 per cent.
The Australian Dollar fell against most major currencies: down 14 per cent against the US Dollar to US$/A$0.89, down 19 per cent against the Sterling to GBP/A$1.86 and down 21 per cent against the Euro to EUR/A$1.54.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564) and may contain general financial advice that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs.