When will our share market improve?

dv141035bIt′s almost seven years since Australia′s sharemarket hit a record high and the question posed on my News Corp Gen Y column this week asked when I thought it would get back there.

We love records. Using the Olympics as an analogy, an event can be a bit of an anti-climax for some viewers if it doesn′t involve a new Olympic record being set. Forget the fact that every single athlete turned in a stellar performance and forget the fact that the previous record may have been set by someone using banned substances. We still expect new records every four years. The sharemarket is much the same: despite various “crashes” its long-term annual performance remains stellar. It′s just not quite reaching the steroid-fuelled heights of 2007 yet.

The heights that the sharemarket reached in November 2007, when the S&P/ASX 200 peaked at just over 6,800, were irrational. So was the 2009 low of 3,120 points. That′s easy to say in retrospect, of course, but anyone following a long-term chart would have made the same conclusion. And if you do want to have a look at a chart, Google my favourite one, the Vanguard 30-year index chart (which is issued each year).

I don′t know when the sharemarket will reach its 2007 highs. I′m happy to go out on a limb and predict 2018, but that′s simply based on charting a logical line across the past 30-year average. What I do know though is that the sharemarket will continue to grow, albeit with some short-term hiccups, because the companies listed on our stock exchange produce goods and services that we consume every day. We′re not about to stop consuming. We′re also not about to stop making superannuation contributions – a fair proportion of which finds its way into the sharemarket. So relax. Over the long-term, you′ll probably be okay.

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