The Australian share market hit a record high in mid-February and then fell to finish the month down (-3.8%), making it one of the worst performing global share markets for the month. Looking at the positives, the current dividend yield (including franking credits) is 4.6%p.a.which is still amongst the highest in the world.
The best returns came from the Utilities (+3.2%) and Communication(+2.6%) sectors, while Technology (-12.3%), and Health Care (-7.7%) both got crushed.
The world share index fell (-0.7%) in February which reflected the strong US share weighting. The US share market accounts for 73% of the world index and Japan a further 5%. Those markets were down (-2.9%) and (-3.5%) respectively, but most of Asia and Europe recorded very strong returns. The UK rose (+1.6%) to a record high, Spain (+7.9%), Italy (+6.0%), Germany (+3.7%), Hong Kong (+7.0%) and China (+2.8%).
The Magnificent 7 US technology companies are all having a tough time so far this year. Only Meta (Facebook) has returned a positive number and Tesla is down (-38.3%).
House prices rose (+0.3%) in February. Melbourne and Hobart were surprisingly the strongest markets, up (+0.4%). For Melbourne, that positive comes on the back of 10 months of falls. Rents also jumped up again (+0.6%), which is the largest increase since May last year. The average gross rental yield is now at 3.7%.
The RBA cut interest rates to 4.1%, which matched the current unemployment rate. Inflation is running at 2.8% and the Australian dollar fell slightly against the US dollar posting its fourth monthly decline over the last 5 months.
The Iron price was up (+5.2%), Gold (+2.2%) while Oil fell (-3.9%) and Bitcoin plummeted (-17.4%).
Making the world great again
‘Make America Great Again’ doesn’t seem to be working for the US share market. In the year leading up to the US election, the US share market provided a return of (+32.0%). Since the change of government, it’s fallen (-5.1%), and the US tech sector is down (-9.5%).
On the other side of the world European share markets have seen their strongest start to the year since 1998, on average up (+8.2%), with Germany up (+15.3%). Asian markets are also going well, with Hong Kong up (+19.5%) for the year and the Chinese technology index (+25.0%). If you are one of the 750 million people living in Europe, or one of the billions living in Asia your investment portfolios are likely off to a great start for 2025.
Australia has ended up following the US lead rather than Europe or Asia and is down (-3.0%) for the year so far. Maybe it’s a Pacific Region thing as New Zealand is doing even worse, down (-7.7%) year to date.
Share market falls happen more often than you think. In Australia, the share market has fallen 10% or more 15 times since 2000 and still produced an average yearly return of (+8.3%). That period includes the Global Financial Crisis in 2008 when the market fell (-40.4%) for its worst ever calendar year return.
Statistically speaking, since 2000 when the Australian market falls 10% there’s a 67% chance it will be up (+4.8%) in 6 months’ time. In the US, investment bank Goldman Sachs produced research on historical returns after US market falls of (-5.0%). The data shows you have an 85% chance of making money in the following six months, with an average return of (+8.0%). The last 10% market fall in Australia happened in June 2022, so history says we are due another soon, but it is nice to know that whenever it happens it’s unlikely to last long.
