Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 313

More please: FY2019 was almost everything up

The month of June 2019 capped off a rare half-year when all of the main types of investment posted higher returns than their long-term annual averages for a full year. Everything went up except residential property.

A game of two halves

Although the overall returns for the 12 months turned out to be good, it was a ‘game of two halves’, with a sea of red ink in the first half and strong rebounds in the second half.

In fact, if an investor had been living on the moon or under a rock for a year, they would have returned delighted at the end of June. If they looked at their portfolio balances for the first time in a year, they would have said something like, "What a great year – everything must have been good in the world. I’ll have another one of those, thanks!"

All they would see are the returns for the full 12 months, shown below in the right-hand set of bars. The broad Australian share market returned 11%, as did unhedged international shares. Bonds also returned better than their long-term averages: 9% for Australian bonds, and 7% for global bonds. Returns from the Australian listed property market were nearly double their long-term average. And all with inflation at just 1.3% for the year.

We had turned defensive from April 2018 by reducing allocations to Australian and global shares to prepare for a fall. We also reduced our currency hedging on global shares to benefit from the falling AUD, increased bond allocations and added gold and US dollar cash. These changes helped cushion investors from most of the December pain. Then in 2019 after the sell-off, we increased our allocations to shares and shifted portfolio settings back toward a moderately-bullish stance.

Why such a difference?

In the first half (July to December 2018) share prices fell sharply in a global slowdown scare, driven by fears of Trump’s trade wars slowing global growth rates, China’s reluctance to stimulate its slowing economy, two more rate hikes from the US Fed, and fears the Fed would continue to raise rates despite early signs of a slowing US economy. Australian shares followed the global rout, although by not as much as the sharp -20% fall in the US market from late September to late December. It was the worst December for US shares since 1931. In the midst of this global panic, I fielded numerous calls and emails from worried investors asking if this was ‘the next GFC’ or even worse.

The first half of 2019 turned out to be a complete turnaround. The Fed stopped raising US interest rates and even started talking about possible rate cuts, the Bank of Japan and European Central Bank also talked up the prospect of providing more support, and China ramped up its stimulus efforts with spending increases, tax cuts and subsidies. In Australia, the RBA shifted its stance toward lower rates. Bank shares benefited from being let off lightly by the Hayne Royal Commission and the re-election of the Morrison government.

Some highlights among Australian stocks

Australian shares have beaten most other countries this year, driven largely by three broad themes:

  1. Collapsing local and global bond yields
  2. Hopes of a housing turnaround following the re-election of the Morrison government, the easing of APRA lending restrictions, and rate cuts from the RBA, and
  3. One-off commodity price rises.

The collapse in bond yields helped utilities (mainly APA +36% this year, and Ausnet +26%), infrastructure (Transurban +30%, Atlas Arteria +27%), listed property trusts (mainly Mirvac +46%, Goodman +45%, Dexus +29%, Stockland +25%, but the retail trusts were very weak), and also Telstra (+36%).

Hopes of a rebound in housing has helped the banks, especially after the election. Shares in the Big Five are up 13-15% each.

Miners have done well despite the general global slide in most commodities prices with the global slowdown. Iron ore miners have benefited from rising iron ore prices caused by mine closures in Brazil (Fortescue +119%, BHP + 25%, RIO + 32%), and rising gold prices lifted the gold miners (led by Newcrest +47%). The mini-recovery in oil prices this year thanks largely to the escalating Trump/Iran conflict has also benefitted oil/gas stocks (Santos +29%, Woodside +16%).

Most global share markets have also been strong this year. The US tech giants have led the rebound: Apple +25%, Amazon +26%, Facebook +47%, Microsoft +32%, Netflix +37%, and even Uber has climbed back above its IPO price after a poor start. Only Alphabet (Google) has been flat this year (+4%).

Every other global sector, and every major country (apart from Japan +6%), has also returned more than 10% this year, which is more than their usual annual averages.

Bond prices and returns in Australia and around the world have benefited from the continued broad decline in bond yields across the board.

But there is a major disconnect here

The global collapse in bond yields reflects increasingly grave fears of slower growth and even possible recessions in Australia, US, Europe, Japan and many other countries, but share prices everywhere have been surging in anticipation of more sugar hits in the form of lower interest rates and more stimulus to try to arrest these slowdowns. These two are incompatible of course and cannot last for years.

We will no doubt have another ‘global reflation’ scare or two (like February and October 2018), and share prices are sure to correct once again as they are starting to run ahead of weakening profit growth rates.

 

Ashley Owen is Chief Investment Officer at advisory firm Stanford Brown and The Lunar Group. He is also a Director of Third Link Investment Managers, a fund that supports Australian charities. This article is for general information purposes only and does not consider the circumstances of any individual.

  •   3 July 2019
  • 5
  •      
  •   

RELATED ARTICLES

Do investors accept lower returns from assets that make them feel good?

The perfect portfolio for the next decade

The BIG picture: portfolios perform for the passive and patient

banner

Most viewed in recent weeks

Why spending more in early retirement can improve lifetime income

Conventional wisdom encourages retirees to preserve superannuation. But if those likely to qualify for the Age Pension later in life spend a little more today, it may deliver higher lifetime income and a more stable retirement.

Testamentary trusts have secured the CGT exemption

Treasury’s latest CGT reform draft delivers a win for testamentary trusts and deceased estates, exempting estate-derived gains from the 30% floor. However, questions on death and divorce rollovers remain unresolved.

Meg on SMSFs: What do we think about reversionary pensions these days?

Reversionary pensions have long been a staple of SMSF estate planning, but are they still the best option? Meg Heffron revisits a once-clear favourite and asks whether changing super rules have shifted the balance.

Is it time to bail on Australian stocks?

For generations, Australian investors have backed banks, miners and dividends. But has that loyalty come at a cost? A look at the numbers raises an uncomfortable question about where future returns will come from.

How does the 4% rule stack up?

The 4% rule has long been retirement's gold standard. But after a difficult period for investors, fresh analysis suggests a more conservative approach may significantly improve the chances of making savings last.

Testamentary trusts survived the trust tax. The drafting battle has just begun.

The fight over testamentary trusts looked settled. Then the draft legislation arrived. Hidden in a technical detail is a question that could force many families to rethink wills they thought were already future-proof.

Latest Updates

Planning

How the typical Australian Family could save $844,350 in taxes

The value of a testamentary trust is not determined by wealth alone. Depending on circumstances, it can reduce the tax burden on inherited income, create efficiencies and help build intergenerational wealth.

Superannuation

There's a reason why your super is locked up until your 60s

For decades, it seemed settled. Then one controversial idea reignited a debate that could reshape the financial future of millions. The real question isn’t who’s right or wrong, but whether a long-held assumption deserves another look.

Property

The housing slide could become a crash

House prices are sliding across Australia, yet the most dangerous ingredient for a housing crash is still missing. If job losses surge amid growing economic risks, today's correction could become a historic property downturn.

Retirement

Under-retiring: The greatest retirement risk in a generation

Two retirees. Similar savings. Completely different lives. New research from Challenger reveals why some Australians confidently spend in retirement while others hold back and the overlooked factor shaping retirement decisions.

Five risks to watch in markets

Things you may often hear are: a recession is around the corner, markets are overpriced, the AI sector is about to flop at any moment. It’s like the never-ending laundry pile that sits in my house, it never really disappears.

Investment strategies

Do you qualify as ‘rich’?

What does it mean to be 'rich'? For something so universally desired, it is surprisingly difficult to define. That ambiguity creates a challenge for investors and raises a bigger question about what financial success really looks like.

Investment strategies

If you’re worried about your bond portfolio, you’re missing the point

Most investors think they know what bonds are for. But when markets turn volatile, a surprising misunderstanding can lead to costly decisions. Here’s the overlooked lesson that could change how you view your portfolio.

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.