Don’t expect the ASX to recover its all-time high soon

Bull, Bear, Stocks and Shares, Bear Market, Stock Exchange, Bull Market, Horizontal, generic. Istock 100627.Our market’s had to do a lot of huffing and puffing, but finally the elusive 6000 points was passed last week.

The way that it has been achieved is more a cause for reflection than for celebration.

That’s because the market is still more than 10 per cent below the peak of just over 6800 points reached on November 1, 2007.

Most developed-country sharemarkets are trading well above their pre-global financial crisis highs of 10 years ago.

The actual experience for investors in the n market has been better than the share-price performance alone suggests.

Over the long-term, the dividend yield of the n market is about 4.5 per cent, or about twice the yield of most developed-country markets.

And once the dividends are re-invested, investors are a long way in front of where they were when our market hit its all-time high of about 6800 points on November 1, 2007.

Since then, the cumulative return has been almost 50 per cent.

Then again, for most small investors it’s the performance of the stocks they hold that matters rather than the market overall.

CommSec has a mums and dads index, which includes dividends. It consists of nine equally weighted stocks – Telstra, CBA, Woolworths, Qantas, AMP, Tabcorp, Suncorp, IAG and Wesfarmers.

These are companies born of the privatisations, demutualisations and sharemarket floats – most of which occurred in the 1990s.

While the mum and dad stocks are better dividend payers than most other stocks, their share price performances have generally been poorer.

I would argue that the main macro-economic factors that account for the relatively poor share price performance of our market are signs of an economy that’s performing relatively well.

That’s because those factors that have helped markets overseas include their central banks printing money and super-low interest rates.

And although our interest rates are at historic lows, they remain higher than other developed countries.

Money printing and super-low rates have been used overseas to jump-start their economies out of the recessions induced by the GFC.

We have reasonable GDP growth, low inflation and low unemployment.

On the other side of the ledger the best of the mining boom is well past and a relatively high n dollar diminishes the competitiveness of our exporters.

n corporate profit growth continues to lag the US and Europe.

The engine of the n sharemarket has three real pistons – the big banks, resources (BHP Billiton and Rio Tinto) and Telstra.

With the banks likely near the top of the cycle and the challenges facing Telstra, I am not expecting to see our market surpass its all-time high of for some time.

It was almost five years ago that the S&P/ASX 200 index crossed 5000 points for the first time since the GFC.

While it may not take five years to get to 7000 points from 6000 points, it’s likely to be years away.

Our market could easily dip back under 6000 points, particularly if the almost nine-year-old US bull market comes to an end.

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