Well another financial year has come to an end and for the Australian stock market it has been a fairly poor FY2014-2015, but if you include dividends an average balanced stocks portfolio could have probably returned 3-4% in dividends which in the era of low interest rates is not too bad. However the reality is that the Australian stock market is under-performing markets in Japan, the US and many in Europe – not to mention Chinese stocks which surged skywards during the past year but now look like they are currently falling back to earth.
As regular readers will know I have been fairly bearish about the Australian stock market for a couple of years, I was also bearish about commodities before that bubble burst and have been cautious about the Chinese economy for quite a while. It now seems to me that many bearish indicators are aligned so there’s not much left to push the ASX 200/ASX All Ords significantly higher in 2015.
But on the other hand we are probably getting near the oversold zone for those brave enough to buy up some sold down blue chip stocks, so for investors with a long term view there might be some good bargains around at the moment.
As for the 2014-2015 financial year, well the best term I can think of to describe the stock market return is “below average”. But that happens quite often, however the real worry is that we are now 8 years past the last market high and still a long way from reaching that peak again. I wonder when we will pass 6500 again?
Unfortunately for most investors, the stock market rally earlier this year fizzled out and then turned into a rout. Consequently this rout basically erased most gains for the financial year for many ASX listed stocks and also so far for the calendar year, as most of the charts I will review will highlight.
First up, the S&P/ASX 200 Index.
S&P/ASX 200 Index (XJO) FY2014-2015 Chart
After a less than impressive start to the financial year the ASX 200 rallied from early 2015 only to give up all these gains from April onwards. We may see the market bounce back if the mess in Greece is sorted, but we still have a slowing economy in China to deal with so I am not expecting too much in terms of a rally over the short term.
It was pretty much the same story for the ASX 200 listed financials sector as the chart below of the ASX 200 Financials (ASX:XMF) illustrates.
S&P/ASX 200 Financials Index (XFJ) FY2014-2015 Chart
Again it certainly looked promising as the early 2015 rally took hold but as with the ASX 200, the rally faded and the index fell back significantly.
For smaller ASX listed (or small-cap) stocks things were a bit tougher as we can see from the chart of the S&P/ASX Small Ordinaries Index (XSO) which I often consider to be the canary in the coal-mine as far as stock market investing goes.
S&P/ASX All Ordinaries Index (XSO) FY2014-2015 Chart
My view is that smaller stocks give us an insight into how the economy is faring and to me it doesn’t look good. If home prices were to roll over this year and head lower then the long overdue recession might be a possibility. But so far it has to said that the Australian economy has had a stellar run which I admit has surprised me.
Speaking of house prices, one ASX Index that has done well over the last 12 months is unsurprisingly related to property.
S&P/ASX 200 A-REIT Index (XPJ) FY2014-2015 Chart
In the case of the XPJ the rally started earlier and has to date, held up pretty well. The current “property mania” in Sydney is sure to have helped push this Index up however it may find it hard going to push higher for the rest of 2015 from this point onwards.
Now a brief look at some mining stocks which not surprisingly have not fared well.
BHP Billiton, Fortesque Metals & RIO Tinto FY2014-2014 Price Chart
Clearly the mining stocks have struggled the the commodities sector in general is still under pressure, however the contrarian in me says that diversified miners like BHP & RIO are attractive long term buys at current prices but please remember, this is not investment advice and their stock prices could still fall a lot further!
Finally let’s have a quick look at the Exchange Traded Fund ETFS GOLD just to get an idea of what the gold price in AUD has been doing during the past financial year.
ETFS GOLD (ASX:GOLD) FY2014-2015 Price Chart
Gold prices have still not fallen back far enough for me to be tempted but having said that ETFS Gold did outperform the ASX 200 Index and plenty of ASX listed stocks over the last 12 months so it’s something I will be watching closely especially if it looks like investors are getting fearful!
So that’s a quick review for the last financial year…the question now is that will happen over the next 12 months? Any thoughts or predictions are most welcome!
This article was written by Greg Atkinson who is the Managing Director of Ohori Capital. Greg is from originally from Sydney but now works and resides in Japan. He can be followed on twitter via GregAtkinson_jp