After 8.5 years: US Dow up 24 percent, AUS All Ordinaries down 22 percent

The following graph is kind of depressing for a number of reasons.

It shows a comparison of the performance of the US share market against the Australian share market since the 2007/2008 Global Financial Crisis (GFC).

The GFC hit around November 2007 at which time the US Dow Jones index (Dow) was at 14,198 points and the Australian All Ordinaries (AllOrds) was at 6,828.

As you can see from the graphic the Dow and the AllOrds are pretty much in step in their dive to the bottom around the first quarter of 2009. They are both still pretty much in step on the way back up until around mid-2010. At this point they part ways. The Dow continues on a fairly strong path upwards right through until around the third quarter of 2015. Whereas the AllOrds kind of flat-lines for 2.5 years until late 2013 and then makes a much slower climb to its peak in early 2015. From there the AllOrds loses significant ground again.

Today the Dow is 24 percent higher than it was when the GFC hit. The AllOrds, which has never really got close to getting back to its pre-GFC level, is still 22 percent down compared to its pre-GFC level.

How this works out in real life is that if you had $100,000 in a superannuation fund that was 100% invested in stock at the start of the GFC and you didn't add a penny to it in the years since then if you were in the US you would now have something like $148,000 in your fund. But in Australia that fund would have about $88,000 in it—it would not even be back to the starting amount

Fortunately very few managed (possibly none) superannuation funds are fully invested in the stock market. But even so, for us Australians nearing retirement the terrible relative performance of our stock market has severely negatively impacted our superannuation over a long term; and this money can never be recovered.

One of the big ironies in this is that we were constantly being reminded by the then Labor government on just how well they had steered Australia through the GFC. We were often told how lucky we were that, as a result of the expert manipulation of the markets by the government, Australia had weathered the GFC much better than almost every other country.

I don't know about you, but based on the above graph, I am not buying it. And now, as we begin to hear what are possibly even worse economic signals, Australia has nothing left to throw at another GFC, or mini-GFC. We have used all the buffers and pulled all the levers yet we are in debt to a degree we probably never thought would be the case for Australia. And the Reserve Bank has driven the cash rate down to a level where there is very little room left to move if the predicted second economic downturn does occur.