Mercedes

A- A A+

The flat lining Australian stock market

David James |  22 March 2015  |  Investing

FlatOne of the curiosities of the Australian stock market is that it has been providing strong returns, but not capital gains. The AFR notes that global stock markets are doing very well:

 

"Global stocks had their best weekly rally in nearly two years, sending two of the biggest equity benchmarks to the brink of records, on speculation the US Federal Reserve will leave interest rates at zero past mid-year while European policy makers press stimulus.

The MSCI All-Country World Index surged 3.2 per cent for the five days, pushing the Nasdaq Composite Index to within 7 points of wiping out all its losses since the internet bubble. The Stoxx Europe 600 Index soared 1.9 per cent to close 0.4 per cent from its March 2000 high.

Mercedes

Global equities added more than $US1.5 trillion this week as the Fed acknowledged that economic growth has moderated, indicating it is in no rush to raise interest rates. Equities also benefited as pressure eased from a surging US dollar and plunging oil."

 

That five day jump is pretty startling, although the volatility suggests there is some risk attached.

Meanwhile, nothing is happening in the domestic market. The Australian stock market has yet to get back to its pre-GFC high, which was over six years ago.

That does not mean that it is a poor investment, though. In the last year, the All Ordinaries has given a return on 11.4 per cent. Yet the capital value of the market has gone nowhere. The returns are almost all coming from dividends. Share prices have gone nowhere:

 

 

This is of great significance to SMSF investors. Investment in the local stock market has become almost exclusively a franked dividend play. Investing in the ASX is more like a bond play than a share play; everything is about yield, not capital gain. It is, of course, greatly preferable to putting the money in cash; the local stock market has been a good place to be. But for those SMSF investors looking for capital gains as well as income, there is good reason to look offshore.

 

 

 

 

 


Mercedes


Similar articles from Investing

BHP and its dividends

Staff writer | 3/30/2015

BHPBHP Billiton is one of the world's resources giants and is a behemoth of the local bourse. Analysts believe it is fully priced, but it may also be attractive for its dividend, which is unusual for a mining company.


Mr Henry does something curious

David James | 3/19/2015

yieldThe former head of the Treasury, Dr Ken Henry, has made a curious investment observation. He has questioned investors focusing on yield.</p,


Property trusts strong

Staff writer | 3/17/2015

StrongProperty trusts are doing well, although there are some concerns in the office market. They may offer diversification options.


Debt and housing crises

 | 12/17/2014

HousingAustralia has had a debt fuelled explosion in housing prices, which has created a generational divide and made the Australian economy, and banks, dependent on the housing market. The lesson of crises, meanwhile, is that they are usually caused by excessive debt.


The timing myth

David James | 12/16/2014

MythMany think that investment is all about doing things at the right time. The long term evidence says otherwise.


 

Subscribe

Subscribe to the Personal Super Investor weekly email to keep abreast of developments in SMSF law and investment markets. SMSF investors looking to improve investment returns from shares, property, cash or other specialised investments, will find the PSI weekly newsletter an invaluable resource.

Subscribe now »

Mercedes