FAREWELL 2016, HELLO 2017
After no gain, excluding dividends, over the 30 months from December 2013 to June 2016, the Australian All Ordinaries Index recorded a 7.7 per cent bounce in the December 2016 half-year. This was assisted by the record low cash rate (1.5 per cent), the 81 per cent rally over the year in the iron-ore price to US$78.87/ tonne and the 52 per cent rally over the year in the oil price to US$56.82/bbl. Copper, a strong indicator for Global Industrial Production, was up 17 per cent to US$2.51/lb.
After recording a 25 per cent rally in the June 2016 half-year, the Gold price retreated 13 per cent in the December 2016 half-year to US$1,147.50/oz. Wheat had a tough year, declining 13 per cent to US$4.08/bushel.
With most indices recording losses in the June 2016 half-year, there were some big moves over the December 2016 half-year. These included the 22.7 per cent rally in the Japanese Nikkei 225 Index (for a 0.4 per cent gain over the year), the 18.6 per cent rally in the German DAX 30 (for a 6.9 per cent gain over the year) and the 14.7 per cent rally in the French CAC 40 (for a 4.9 per cent gain over the year). The US Nasdaq Index was up 11.2 per cent for the December 2016 half-year and 7.5 per cent for the year while the UK FTSE 100, despite the BREXIT vote, was up 9.8 per cent for the December 2016 half-year and 14.4 per cent for the year.
The biggest news over the December 2016 half-year was the reversal in most countries sovereign bond yields. US ten-year bonds sold off by 0.97 per cent from 1.47 per cent (after hitting a low of 1.36 per cent in July) to 2.45 per cent. Australian ten-year bonds reversed from 1.98 per cent (after recording a low of 1.80 per cent) to 2.77 per cent. With the relatively smaller sell-off of European sovereign bond yields, they remain stubbornly low and in our opinion are certainly are not pricing in the risks around that region.
While the Australian Dollar over the year was reasonably steady against the US Dollar, the Euro and the Yen, it rallied 15.4 per cent from 2.02 to 1.71 against the British Pound.
| 31-Dec 2015 | 30-Jun 2016 | 30-Dec 2016 | 6 months to 30 Dec 2016 | 12 months to 30 Dec 2016 | |
| % Change | % Change | ||||
| Indicies | |||||
| All Ordinaries | 5,344.6 | 5,310.4 | 5,719.1 | 7.7% | 7.0% |
| S&P 500 | 2,043.9 | 2,098.9 | 2,238.8 | 6.7% | 9.5% |
| Nasdaq | 5,007.4 | 4,842.7 | 5,383.1 | 11.2% | 7.5% |
| Nikkei 225 | 19,033.7 | 15,575.9 | 19,114.4 | 22.7% | 0.4% |
| FTSE 100 | 6,242.3 | 6,504.3 | 7,142.8 | 9.8% | 14.4% |
| Dax 30 | 10,743.0 | 9,680.1 | 11,481.1 | 18.6% | 6.9% |
| CAC 40 | 4,637.1 | 4,237.5 | 4,862.3 | 14.7% | 4.9% |
| Shanghai Composite | 3,539.2 | 2,929.6 | 3,103.6 | 5.9% | -12.3% |
| Hang Seng | 21,914.4 | 20,794.4 | 22,000.6 | 5.8% | 0.4% |
| Sensex (India) | 26,117.5 | 26,999.7 | 26,626.5 | -1.4% | 1.9% |
| NZ50 Gross | 6,324.3 | 6,897.5 | 6,881.2 | -0.2% | 8.8% |
| Bonds | |||||
| US 10 Year Bonds | 2.27% | 1.47% | 2.45% | 0.97% | 0.18% |
| German 10 Year Bunds | 0.63% | -0.13% | 0.20% | 0.34% | -0.42% |
| UK 10 Year Gilts | 1.96% | 0.86% | 1.24% | 0.37% | -0.72% |
| Japan 10 Year Bonds | 0.26% | -0.22% | 0.04% | 0.26% | -0.22% |
| Australian 10 Year Bonds | 2.88% | 1.98% | 2.77% | 0.78% | -0.12% |
| Australian 11am Call | 2.00% | 1.75% | 1.50% | -0.25% | -0.50% |
| Commodities | |||||
| Gold (US$/oz) | 1,061.10 | 1,321.90 | 1,147.50 | -13.2% | 8.1% |
| Oil (US$/bbl) | 37.28 | 49.68 | 56.82 | 14.4% | 52.4% |
| Iron-ore (US$/tonne) | 43.57 | 55.66 | 78.87 | 41.7% | 81.0% |
| Copper (US$/lb) | 2.14 | 2.19 | 2.51 | 14.2% | 17.4% |
| Wheat (US$/bushel) | 4.70 | 4.31 | 4.08 | -5.4% | -13.2% |
| Currencies | |||||
| $US/$A | 0.73 | 0.75 | 0.72 | -3.4% | -1.1% |
| $A/GBP | 2.02 | 1.79 | 1.71 | -4.3% | -15.4% |
| $A/EUR | 1.49 | 1.49 | 1.46 | -2.1% | -2.1% |
| Yen/$A | 87.60 | 76.90 | 84.22 | 8.7% | -3.9% |
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
