The Australian share market was up (+4.6%) in January, hitting a new high point and marking the best monthly return since July 2024.
The best performing sectors were Financials (+6.1%) and Consumer Discretionary (+7.1%).The only negative performance came from the Utilities sector (-2.1%).
The world share index rose (+3.6%) for the month as European shares rallied. The US market managed a (+3.2%) return while the UK (+6.1%), France (+7.7%) and Germany (+9.1%) all had a strong month. China (-3.0%) and Japan (-0.8%) both fell.
Nvidia, the world’s second largest company, made headlines for the wrong reasons. Its share price fell (-16.9%) in one day, losing $600 billion in value for the biggest one-day loss in US history.
Home values were flat to start the year, although Melbourne (-0.6%), Canberra (-0.5%), and Sydney (-0.4%) all posted losses. This was offset by gains in Brisbane (+0.3%), Perth (+0.4%) and Adelaide (+0.7%). The average gross rental yield of 3.5% remained unchanged.
The Australian dollar fell (-0.5%) against the US dollar, the 12 month inflation figure fell to 2.4%, paving the way for February’s interest rate cut, and the unemployment rate stayed at 4.0%. There are currently more people employed than at any stage in Australia’s history with 64.6% of all Australian residents over 15 working. The Iron Ore price fell (-2.2%) while the Oil price was up (+2.6%). Gold (+7.4%) continued its recent strong run, while Bitcoin reached a new high after jumping (+8.8%) to start the year. Interestingly, none of these commodities come close to the performance of eggs in the US. Believe it or not, Fresh Hen Eggs are a tradable commodity (in 5 ton lots). The price of eggs was up (+22.0%) for January and (201.7%) over the past year. With Easter around the corner eggs are shaping up as the new Bitcoin.
Projections for 2025
After strong returns for 2023 and 2024, expectations are more subdued for 2025.
It’s always interesting to see what the fund managers and economists forecast for the year ahead. The fact that they all come up with different numbers highlights that their estimates are just as likely to be as correct as yours.
Anyway, if you want to know what they are expecting:
AMP predicts a total Australian share market return of (+7%),Morgan Stanley (+8%), Macquarie Group (+8%), Citi Group (+9%), UBS (+12%) and JP Morgan (0%).
According to the experts the Australian dollar should rise in value and be worth $0.67US and the RBA cash rate should have fallen to 3.60%. I guess we’ll know who was right in 10 months’ time. If you are worried about what 2025 holds, then perhaps what happened in 2023 might give you some comfort. That year the Australian share market went backwards in February, March, May, August, September and October. Things didn’t look great at the end of October and then strong returns in November and December lifted the total return to (+12.1%). It’s also helpful to remember (+11.4%) – that’s the average annual return you would have received from the Australian share market over the last 50 years if you had just ignored everything and stayed invested.
