Share Market resets back to level of two years ago

It’s the 5th Dec 2018. Ten years since the GFC. Today our market opened at a 22 month low.

Pre-GFC Update.jpg

As the Australian stock market struggles to get back to its pre-GFC level of 2007 it has stumbled and fallen by another 1.6 percent today putting back to levels of two year ago.

October and November have been painful months for the Australian market and for anyone with superannuation—which is probably everybody who is working considering superannuation is compulsory.

The Australian ‘All Ordinaries’ index started the year on 6,166 points and at that time there were many market experts predicting that the index would finally and easily break through the GFC barrier of 6,800 points by the end of the year; thereby finally getting the market back to its 2008 levels.

Well, those experts will be feeling a bit silly now. Market trends suggest the index will be lucky to finish the year anywhere near the 6,166 points it started the year at and the chances of it getting close the pre-GFC mark of 6,800 would be assessed as impossible.

Given that 2018 was predicted to be a ‘good’ year for the markets, what can we expect for 2019?

We won’t get the official New Year market predictions from the experts until about mid-January, but the early indications are for a ‘flat’ year in 2019. This is partly due to a combination of falling commodity prices, low and falling consumer sentiment, banks tightening up on loans for property and vehicles (as an outcome of the Royal Commission into banking), falling property prices, and the massive relative debt burdens that households have accumulated over the last five years.

Oh! And add to that the ‘average’ $400k superannuation fund has taken a $28k hit in 2018—which is likely to be factored into spending by anyone getting close to retirement.

On top of this, relative to inflation, wages have gone backwards for all but the top five percent of the workforce. For most of us in the remaining 95 percent of the workforce our purchasing power has reduced over the last five years due to very low wages growth. While the cost of living has increased by a shade under 11 percent in the last five years, very few wage earners would have experienced an increase in income much over six percent during that time. Thereby leaving a five (5) percent negative gap in purchasing power.

During the last five years I was ‘converted’ from contractor to staff. As an outcome of that my gross has reduced by a whopping 25.7 percent over the last five years.