The Australian share market fell (-0.7%) in September, breaking a 5-month positive streak. The market’s total return for the last 12 months is still a very healthy (+10.8%). The pessimistic view is that the price to earnings ratio (an indicator on how expensive the share market is) is at a record high and the forecast dividend yield is at a 30 year low.
Only one sector managed a positive return, with Materials delivering (+6.5%). Materials returns were almost single handedly boosted by gold miners. There are 25 gold mining companies listed on the Australian share market. Those companies have recorded an average gain of (+97.0%) over the past 12 months. The worst sectors for the month were Energy (-9.1%), Consumer Staples (-4.2%) and Health Care (-4.9%).
The world share index rose (+3.3%). The US share market climbed (+3.2%), the NASDAQ was up (+5.9%), Japan (+5.9%), the UK (+1.8%), France (+2.5%), and China (+0.6%), while Germany was one of the few markets to go backwards (-0.1%).
The “Magnificent 7” rose (+9.0%) during September on the back of the continuing AI boom. It seems all you need to do to cash in on the boom is start a company with the name AI in the title somewhere. The Financial Times highlighted the fact that 10 new AI startups (none of which have ever made a profit) have gained US $1 trillion in market value over the past 12 months.
The current poster child for the AI bubble is Oklo Inc, a nuclear power startup with plans to provide power to data centres. The company has no earnings, no licence to operate and no contracts but has delivered a 700% return over the past year, valuing it at approximately US$17 billion.
House prices rose (+0.8%) for September – the strongest monthly growth since October 2023. Darwin led the way up (+1.7%) then Perth (+1.6%) and Brisbane (+1.2%). Melbourne was up (+0.5%) and is still the worst performing of the capital cities over the past 12 months. The median rental across the capital cities is now $702p.w.
The unemployment rate jumped to 4.5%, Inflation is running at 3% and the $AUD rose (+1.1%) against the $US. The RBA cash rate was unchanged at 3.60% with predictions of one final rate cut in November this year.
The Oil price fell (-2.6%), Iron Ore was up (+3.4%), Gold jumped (+11.9%) and Bitcoin (+4.3%). The biggest mover for September was Silver. The price went up (+17.4%) and is now outperforming Gold for the year.
A brief history of share market returns
In light of expectations of the AI bubble bursting and investment markets being overpriced, now is a great time to revisit why it makes sense to stay invested. Katana Asset Management has complied statistics on the Australian share market to the end of 2024 for the last 149 years the share market has existed.
Market crashes are inevitable, but over the past 149 years there has only been one year where the mark fell by more than 30% (the GFC in 2008). The next year the share market returned (+39.6%) and rose in 8 of the next 9 years.
