ASX investors brace for lost decade

There's an enormous challenge ahead for the Australian sharemarket with trading for 2017 due to kick off on Tuesday.

If the All Ordinaries does not breach the record high of 6853.6 by November 1, it means that, for just the fourth time shares have not been able to edge higher over a 10-year period.

It will deliver local investors a lost decade, something that has happened between1964-1974,1968-1978 and1890-1900.

A 10-year period with nothing to show for it doesn't happen that often, but if the All Ordinaries doesn't rise by about 20 per cent, or about 1140 points this year, they will.

For those who throw out the mantra of "it's all about time in the sharemarket not timing" it means they will have to come up with another slogan.

Unlike Wall Street, where the Dow Jones Industrial Average has tripled from its low during the financial crisis of 6547.05 in March 2009, the local sharemarket has never fully recovered.

ASX 200 still well below record high

The All Ordinaries index finished last year at 5719.1, while the S&P ASX 200 index closed at 5665.8, a fair way off its record high of 6828.7 posted in November 2007.

In contrast the Dow Jones is now staring down the barrel of 20,000. Edit - It's now breached this

Of course, if dividends are included, then the All Ords is already at a record high.

Since November 1, 2007, when it reached 42,946, the All Ords Accumulation Index has risen to 53,354, a gain of close to 25 per cent over nine years,

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From memory the US had their lost decade whilst we were enjoying the mining boom. They've since gone gangbusters whilst we've been experiencing our lost decade.

Trouble is with all these sensationalist articles is that the author's are always assuming that an investor bought at the top of the market prior to the GFC. And remember the ASX top was when we had one of the biggest mining booms on record.

Turn this on it's head. What if instead of doing what these author's do in always assuming the investor buys at the top of the market (highly unlikely) what if we picked the bottom. Around a year later than that top there was a bottom over 50% down. What if we choose that as the time when the investor bought in! Add a decade to that (just an extra year) then see what the result looks like.

But it does highlight something that I think is worth considering and that is to invest heavily in times of gloom and back off buying and accumulate cash when euphoria is in the market. And there have been numerous gloomy patches in the market (bear market, corrections, dips) since the GFC. Use a buying strategy like this then you won't be too concerned about lost decades!

New to LICs, go to (Beginner's Guide to LICs) found here:
Beginner's Guide to Investing in Listed Investment Companies

 

Lets face it with the media writing the way they do their incentive is to make it sound as dramatic as possible as bad as possible.

Picking the top of the market as a measurement date, not including large ongoing income returns etc.

Always an unbalanced viewpoint never rational and well rounded. Why? Because it's boring and no one wants to read about it!

Haha my rant is over. Safe to say I have little to no time for the 'news'.

Just a happy boring investor

 

Doesn't this link Global Stock Market Valuation Ratios (Shiller PE, CAPE, PB...) imply we are at the point of being near "over-valued"? Does this imply we have another decade of the same?

 

The older (and hopefully wiser) I get, the more important I feel timing is.

 

As they said, with dividends (and franking) it's in front

If you'd continued investing at regular intervals throughout you would also have exceeded the charts below



I'd love to get to the stage where like Captain Dividend @austing I'm receiving more dividends than I can spend, however with 3 kids thats a long way off

 

Any idea Redwing what history says about what happened in the following 10 years after the lost decade? I mean what happened between 1974-1984, 1978-1988 and 1900-1910?

Since gaining 20% seems highly unlikely based on current environment we may be in a lost decade situation and what could happen next could be very interesting to know.

Cheers,
Oracle.

 

Hi Oracle

I have this if it helps

ASX200 Accumulation Index as at EOFY Index Value Yield

2016.. 48,872.. 0.56%
2015.. 48,602.. 5.68%
2014.. 45,991.. 17.44%
2013.. 39,163.. 22.75%
2012.. 31,905.. -6.71%
2011.. 34,201.. 11.73%
2010.. 30,610.. 13.14%
2009..27,054.. -20.14%
2008.. 33,875.. -13.41%
2007.. 39,119.. 28.66%
2006.. 30,405.. 23.93%
2005.. 24,534.. 26.35%
2004.. 19,417.. 21.61%
2003.. 15,967.. -1.71%
2002.. 16,245.. -4.69%
2001.. 17,045.. 9.07%
2000.. 15,628.. 15.51%
1999.. 13,530.. 15.34%
1998.. 11,731.. 1.65%
1997.. 11,541.. 26.56%
1996.. 9,119.. 15.83%
1995.. 7,873.. 5.71%
1994.. 7,448.. 18.47%
1993.. 6,287.. 9.91%
1992.. 5,720.. 13.33%
1991.. 5,047.. 5.87%
1990.. 4,767.. 4.08%
1989.. 4,580.. 3.53%
1988.. 4,424.. -8.61%
1987.. 4,841.. 54.02%
1986.. 3,143.. 42.48%
1985.. 2,206.. 36.51%
1984.. 1,616.. 13.48%
1983.. 1,424.. 34.72%
1982.. 1,057.. -29.06%
1981.. 1,490.. 15.77%
1980.. 1,287

 

The accumulation index tells the story...but yeah, lost decade etc.

 

What @Redwing said:
If you'd continued investing at regular intervals throughout you would also have exceeded the charts below

 

There is a fair bit of overlap on the first two, can't have two lost decades in 14 years IMO.

Nothing we can do about it.

 

Of course you can, ask any Hedge Fund Manager who can show a profit over the same period

2 periods of 10 years with losses.. within a period of 14 years..1 year with a profit and you can adjust your end and start points

 

Streetracks ASX200 last 10 years (sans dividends)

 

And from a low point in 2009 to now

 

Well just for perspective.

And hindsight
And for a reality check

On the advice of a relative and advisor
I was risk adverse and decided to buy into a managed global share fund. My goal was to have a safe investment long term.
This fund had just just doubled in two years so I was confident it would do well.

Well well well.
For the first time since ei bought it the shares have now recovered to the price I paid........

I purchased in 2008!!!!!

Gtfo

It dropped to as low as minus 45%

Had I put it in a term deposit and I would be so much further in front

This is reality but totally sux and I hate it

 

@TMNT Any dividends?

 

Good point. The dataset posted didn't include all of 78-88 but the numbers posted include:

1987.. 4,841.. 54.02%
1986.. 3,143.. 42.48%
1985.. 2,206.. 36.51%
1984.. 1,616.. 13.48%
1983.. 1,424.. 34.72%

That would have been a glorious time to be an investor! ... until 1988 ... -8.61%. Still that doesn't even chew up half the gains of '87.

 

I had the dividends reinvested. So I never saw a cent. But the net balance has just hit my original price!

Feeling very stupid

 

How many slices of the pie did you start with.
How many slices of pie do you now have?.......

 

in english???