After reaching the highest level in more than 10 years in late August 2018, the Australian share market sold down heavily over the last quarter.

It ended up down 6.7% for the year.

Even a late rally over the Christmas period wasn’t enough to save the market from a 750-point fall from its peak and a 583-point decline over the final quarter.

Post-GFC high

The Australian Economy has remained relatively strong and the ASX200 hit its peak of 6,352 as the bulk of full year results were being reported by Australian companies.

Overall, the earnings reports weren’t too bad.

More companies met or beat their earnings expectations rather than missed their predictions.

However, it wasn’t long before the market succumbed to downward movements on global markets and rising concerns by investors.

Return of uncertainty

Issues such as the rising trade tensions between the US and China, the clumsy Brexit plan by the UK, falling local property values combined with revelations from the Financial Services Royal Commission and the associated credit squeeze, added to concerns for investors.

However, it was the collapse of US equity prices amid concerns about the impact of the past three years of interest rate hikes by the US Fed that really accelerated the sell-off.

This has led to the first calendar year loss for the ASX, and a likely loss for the average Australian superannuation fund since 2011.

Looking ahead

The international issues mentioned above – the China-US ‘trade war’, Brexit, possible further US interest rate rises – all make for a particularly murky outlook.

Add in local factors such as the release of the formal findings of the Financial Services Royal Commission, further predictions of a fall in housing prices and an upcoming election, and there are plenty of reasons to expect further market volatility.

While this return of volatility can unsettle investors, it is worth noting that, historically, negative years have often been followed by strong gains as markets subsequently recover and investor confidence returns to the market.

So far this year, the UK share market and Great British Pound have held steady in the face of the Brexit mess and China and the US are at least talking through their issues.

Australian investors are also likely to have priced in their expectations of the Financial Services Royal Commission fallout.

At LDB we position our clients’ portfolios with these many issues in mind, but as always, if you have any concerns about your investment mix, be sure to talk to your adviser.