Market volatility and its impact on Australian and international share markets
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Market volatility and its impact on Australian and international share markets. 1. What’s contributing to current market volatility?. 2. How has volatility affected the Australian market?. 3. A quick look at international markets. 4. What this means for Australian investors.

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1. What’s contributing to current market volatility? international share markets

2. How has volatility affected the Australian market?

3. A quick look at international markets

4. What this means for Australian investors

5. Volatility in perspective


Market international share marketsvolatility

Many factors contributing to ongoing volatility

High inflation

A worsening of the global ‘credit crunch’

Increasing fears of a global recession

Deterioration of US & global financial systems


The global ‘credit crunch’ takes hold international share markets

The global ‘credit crunch’ has worsened, with some major US and global financial institutions faltering

The outlook for global growth has deteriorated and there are now genuine fears the global economy is headed for a recession

High inflation is still a concern for the world’s central banks, particularly as they struggle to stimulate economic growth.


1. What’s contributing to current market volatility? international share markets

2. How has volatility affected the Australian market?

3. A quick look at international markets

4. What this means for Australian investors

5. Volatility in perspective


Rising market volatility has seen the Australian share market fall 33% in the past year

S&P/ASX 300 Accumulation Index – 12 months to 30 September 2008


…but it remains at elevated levels over the long-term, up 174% over the last 10 years!

S&P/ASX 300 Accumulation Index – 10 years to 30 September 2008


1. What’s contributing to current market volatility? 174% over the last 10 years!

2. How has volatility affected the Australian market?

3. A quick look at international markets

4. What this means for Australian investors

5. Volatility in perspective


Market volatility has affected all markets, not just our own…

Major international markets – 12 months to 30 September 2008

S&P500 (US) (-23.6%)

FTSE 100 (UK) (-24.2%)

DJ Euro Stoxx 50 (Europe)

(-30.7%)

Nikkei 225 (Japan)

(-32.9%)


The global share market has fallen over 19% in the past year…

Global share markets – 12 months to 30 September 2008


1. What’s contributing to current market volatility? year…

2. How has volatility affected the Australian market?

3. A quick look at international markets

4. What does this means for Australian investors?

5. Volatility in perspective


What does all this mean for Australian investors? year…

Market volatility is expected to continue.

Most asset classes other than cash look set to post a negative return this year

From a valuation perspective, recent market declines are bringing some asset classes back to attractive levels

We could begin to see signs of better market performance early in 2009

The Australian economy is likely to slow, reflecting conditions in the US and Europe.

It has, however, held up well compared to its global counterparts


What about the longer-term outlook? year…

Global economic outlook remains uncertain

Global growth will continue to slow with the possibility of a lengthy recession

Outlook for Australian economy is a little better, supported by a healthy government surplus, ongoing commodities demand from China and India, RBA’s move to lower interest


1. What’s contributing to current market volatility? year…

2. How has volatility affected the Australian market?

3. A quick look at international markets

4. What this means for Australian investors

5. Volatility in perspective


Growth assets delivered strong returns last year, however, most affected by volatility this year…


70 most affected by volatility this year…

60

50

40

30

20

10

0

-10

-20

-30

1974

1977

1980

1983

1986

1989

1992

2004

2007

1956

1959

1962

1965

1968

1971

1995

1998

2001

Volatility can hurt returns in the short term…

Annual returns of Australian shares (%) – All Ords / ASX S&P Accumulation Index (since 1956)


35 most affected by volatility this year…

30

25

20

15

10

5

0

-5

-10

1975

1978

1981

1984

1987

1990

1993

2005

1960

1963

1966

1969

1972

1996

1999

2002

…but it’s a different picture over the longer term

Rolling 5 year returns of Australian shares (% annualised) – All Ords / ASX S&P Accumulation Index (since 1960)


30 most affected by volatility this year…

25

20

15

10

5

0

-5

-10

1980

1983

1986

1989

1992

1995

2004

2007

1965

1968

1971

1974

1977

1998

2001

And the longer the better!

Rolling 10 year returns of Australian shares (% annualised) – All Ords / S&P Accumulation Index (since 1965)


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