As fiscal 2019 has drawn to a close, let’s take a look at the year that was. In sporting parlance, it was definitely “a game of two halves.” Virtually all major indexes declined in the December 2018 half-year, however this proved temporary and the recovery in the June 2019 half-year was quite extraordinary.

To illustrate this, the following three markets are example of movements, split between the December 2018 half-year and the June 2019 half-year:

A big influence on markets was the continuing decline in interest rates. After hitting 3.24 per cent in October 2018, US ten-year treasury bonds rallied to 2.0 per cent at June year-end. Factors like the Morgan Stanley US business confidence indicator plunging to the lowest level since December 2008 means all eyes are on the US/ China trade tensions.

The prize for the best performing market for the year goes to New Zealand (+17.4%) and this was followed by India (+11.2%), the S&P 500 (+8.2%) and the Nasdaq (+6.6%).

Excluding dividends, the Australian All Ordinaries Index appreciated by 6.5 per cent over fiscal 2019 to 6,700, only 150 points from the all-time high of 6,850 points recorded in November 2007.  The Nikkei 225, the FTSE 100 and the Hang Seng all recorded a capital loss for the fiscal year.

Global negative yielding debt is at a record high of US$12.5 trillion, and “risk-taking” is on the increase with 80 per cent of US IPOs coming to the market which are currently “earnings-free.”

In Australia, ten-year government bonds yield rallied from 2.63% to 1.32%, and together with the cash rate being cut from 1.5% to 1.25% households have been strongly incentivised to go up the “risk curve” by switching from being savers to borrowers.

While the easy monetary policy pursued by the Reserve Bank of Australia (RBA) assisted a boom in house prices (and “zombie companies”), it has been harmful to “good savers.” The slump in the return on short-term deposits and bonds – the low risk component of the portfolio – has meant many older Australians are being forced to either reduce their spending or to run down their assets.

On the commodities front, iron-ore and gold deserve special mention, closing at US$109.20/tonne (+68.0%) and US$1,409.60 (+12.5%), respectively.

The Australian Dollar was weaker against all major currencies, as the strong indications of synchronised world growth so prevalent in 2017 seemed to fade as we progressed into fiscal 2019.