investment market reflection - Australian sharemarket indices to 2011

What were investment conditions like in March 2011?

Investment market reflection is a useful activity by which to enhance coping mechanism, particularly in times of volatility in markets: providing a guide to eventual outcomes, reminding us that for many reasons, volatility occurs – and over time, correct.

Almost without doubt, the indicators were, just two years into the recovery from the GFC, that equities had been the recent best performer: equity investors were being rewarded for including economic risk in their portfolios!

Why was this so? (the other asset classes)

In a global sense, whilst inflation over the prior several quarters had been benign (very flat), interest rates were also at historically low levels. Whilst a low-interest-rate environment creates little threat to the spending power of cash, there is also little to be earned from investing in Cash!

Property, whether at the commercial end of the market or the residential, was being impacted by the lack of availability of credit (and serious levels of foreclosures in a number of overseas markets) and so the performance of this sector was of concern for investors.

Significant levels of borrowing by many foreign governments (and sovereign debt ‘failures’ around Europe) kept dedicated Bond investor at bay, guessing what the next move in this asset class might be.

What is it about equities?

Equities are a favoured long-term investment because they reflect the economic activity of the economies in which the companies operate: in March 2011, consumer spending had started increasing as unemployment was being reined in. Consequently, corporate turnover was increasing; and bottom-line returns were supporting the price/earnings ratio that were only around long-term average rates.

Investment market reflection (in your portfolio)

For further discussion on any of these matters and how your portfolio might be progressing toward achieving your financial goals and objectives, meet with an experienced adviser at Continuum Financial Planners Pty Ltd. To arrange your personal meeting with one of our team, please use the Contact Us form on our website, or phone our office on 07-34213456 to make an appointment: ‘we listen, we understand; and we have solutions’ – that we deliver in ‘personalised, professional wealth management advice’.

(This post was originally made in March 2011: it has been occasionally updated and refreshed since then – most recently, in January 2019.)