• Wesfarmers shows the risk of acquisition-based growth read here

Farewell 2017, Hello 2018

02122017

Farewell 2017, Hello 2018

As 2017 has drawn to a close, let’s take a look at the year that was. Excluding dividends, the Australian market put on 7.8 per cent in 2017, and 7.0 per cent in the six months to December.  Over the year, several indices did significantly better, including the Hong Kong Hang Seng up 36.0 per cent, the US Nasdaq up 28.2 per cent, the Indian Sensex up 27.9 per cent, the New Zealand Gross 50 up 22.0 per cent, the US S&P 500 up 19.4 per cent and the Japanese Nikkei 225 up 19.1 per cent.

The Australian market out-performed the UK FTSE, up 7.6 per cent and the Shanghai Composite Index, up 6.6 per cent.

After twice challenging 6,000 points in April 2015 and May 2017, the Australian All Ordinaries finally breached this level, finishing the year at 6,167 points.  While most indices are at or near their all-time highs, the Australian market will need to put on a further 11 per cent if it is to reach its record high of 6,850 points recorded in November 2007.

Assisting global share markets has been the improving growth outlook coupled with the generational low interest rates.  Many commentators, including yours truly, have been surprised that the yield of many country’s sovereign bonds hardly moved over 2017 and in the US, the UK and Australia, their ten-year bond yields finished the year lower than where they started.  The US Federal Reserve pushed up the US cash rate by 0.25 per cent in each of December 2016, March 2017, June 2017 and December 2017, to finish the year at 1.5 per cent.

Commodities remain firm, with Gold finishing the year at $1,303/oz., up 13.5 per cent and Copper continuing its rally to US$3.30/lb., up 31.7 per cent over 2017.  Oil and iron-ore finished the year at US$66.90/bbl. and US$69.20/tonne, respectively.  Only wheat disappointed, declining 16.4 per cent in the six months to December to US$4.27/bushel.

The Australian Dollar rallied from US$0.72 to US$0.78, was steady against Sterling and a little weaker against the Euro.

31-Dec 2016 30-Jun 2017 31-Dec 2017 6 months to 31-Dec-17 12 months to 31-Dec-17
% Change % Change
Indicies
All Ordinaries 5,719.1 5,764.0 6,167.3 7.0% 7.8%
S&P 500 2,238.8 2,423.4 2,673.6 10.3% 19.4%
Nasdaq 5,383.1 6,140.4 6,903.4 12.4% 28.2%
Nikkei 225 19,114.4 20,033.4 22,764.9 13.6% 19.1%
FTSE 100 7,142.8 7,312.7 7,687.8 5.1% 7.6%
Dax 30 11,481.1 12,325.1 12,917.6 4.8% 12.5%
CAC 40 4,862.3 5,120.7 5,312.6 3.7% 9.3%
Shanghai Composite 3,103.6 3,192.4 3,307.2 3.6% 6.6%
Hang Seng 22,000.6 25,764.6 29,919.2 16.1% 36.0%
Sensex (India) 26,626.5 30,921.6 34,056.8 10.1% 27.9%
NZ50 Gross 6,881.2 7,611.4 8,398.1 10.3% 22.0%
Bonds
US 10 Year Bonds 2.45% 2.31% 2.41% 0.10% -0.04%
German 10 Year Bunds 0.20% 0.47% 0.42% -0.04% 0.22%
UK 10 Year Gilts 1.24% 1.26% 1.19% -0.07% -0.05%
Japan 10 Year Bonds 0.04% 0.08% 0.04% -0.04% 0.00%
Australian 10 Year Bonds 2.77% 2.60% 2.63% 0.03% -0.14%
Australian 11am Call 1.50% 1.50% 1.50% 0.00% 0.00%
Commodities
Gold (US$/oz) 1,147.50 1,241.61 1,302.80 4.9% 13.5%
Oil (US$/bbl) 56.82 47.92 66.87 39.5% 17.7%
Iron-ore (US$/tonne) 78.06 61.61 69.24 12.4% -11.3%
Copper (US$/lb) 2.51 2.70 3.30 22.3% 31.7%
Wheat (US$/bushel) 4.08 5.11 4.27 -16.4% 4.7%
Currencies
$US/$A 0.72 0.77 0.78 1.6% 8.3%
$A/GBP 1.71 1.70 1.73 2.1% 1.1%
$A/EUR 1.46 1.49 1.54 3.5% 5.3%
Yen/$A 84.22 86.42 88.03 1.9% 4.5%

Chief Executive Officer of Montgomery Investment Management, David 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.

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Comments

  1. Hi David,

    Thanks for the yearly wrap up.

    I would really appreciate your thoughts on Chorus Limited (CNU), I have been a long time holder but the forecasted drop off in earnings is making me a little nervous. Do you have an opinion on their outlook?

    Kind regards
    Simon

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