• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

SuperGuide

Superannuation and retirement planning information

  • SuperGuide Premium
  • Account
  • Log In
  • SuperGuide Premium
  • Account
  • Log In
  • How super works
    • Super for beginners
    • Super rules
    • Employers guide to super
    • Super contributions
    • Super and tax
    • Accessing super
    • Super news
    • Women and super
    • Super tips and strategies
    • How-to guides
    • Super quizzes
    • Superannuation Q&As
    • Superannuation glossary
  • Super funds
    • Best performing super funds
    • Super fund rankings
    • Best performing pension funds
    • Pension fund rankings
    • Super fund average returns
    • Super investing strategies
    • Comparing super funds
    • Choosing a super fund
    • Choosing an investment option
    • Super fund fees
    • Insurance and super
    • Super fund profiles
  • SMSFs
    • SMSFs for beginners
    • SMSF administration
    • SMSF checklists
    • SMSF compliance
    • SMSF investing
    • SMSF pensions
    • SMSF strategies
    • SMSF Q&As
  • Plan your retirement
    • Retirement planning for beginners
    • When should I retire?
    • How long will I live?
    • How much super do I need?
    • Will I get the Age Pension?
    • How much will I spend in retirement?
    • Financial advice
    • Retiring overseas
    • Preparing for retirement
    • Retirement planning strategies
    • Retirement calculators and reckoners
  • In retirement
    • Income in retirement
    • Super lump sums
    • Super pensions
    • Age Pension
    • Working in retirement
    • Life in retirement
    • Senior concessions and services
    • Aged care
    • Estate planning
    • Super death benefits

Home / SMSFs / SMSF investing / 2019 Year in Review

2019 Year in Review

January 13, 2020 by Barbara Drury Leave a Comment

Reading time: 5 minutes

On this page

  • Bumper returns from shares
  • Property recovery begins
  • Interest rates fall …
  • … as the economy loses momentum
  • Commodities mostly positive
  • The year ahead

Shares at record highs and interest rates at record lows. One of the defining aspects of 2019 was the flight to higher risk assets in pursuit of higher returns.

And it certainly paid off. Despite the US-China trade war, the Brexit impasse and a slowing global economy, investors with a diversified portfolio finished 2019 in surprisingly good shape.

Australian shares had their best year in a decade. The All Ords Accumulation Index, which measures the total return from Australian shares (prices plus dividends), finished the year up a smidgeon over 24%. This is more than twice the long-term average of 9.9%.

Source: RBA

Bumper returns from shares

Excluding dividends, the All Ords Index was up 19.1% and the ASX 200 rose 18.4%, but it was a roller coaster of emotions.

Most of the gains came in the first half year, slowing only in the lead-up to the May Federal election. The ASX 200 hit a record high in July, retreated, then reached a new high on November 28 as hopes grew of a resolution to the US-China trade war.  

Many global bourses performed even better. In the US, the S&P 500 was up 28.9% while the technology-stock laden Nasdaq Index was up 35.2%. The New Zealand market (NZ50 Gross) was up 30.4% while French (CAC 40) and German (DAX 30) shares were up 26.4% and 25.5% respectively.


Advertisement
SuperGuide Premium is ad-free

Across the channel, the UK market was weighed down by uncertainty over Brexit, with the FTSE 100 up 12.1%.

China was a tale of two cities. The Shanghai Composite lifted 22.3% while Hong Kong’s Hang Seng rose just 9% as the increasingly desperate struggle for democracy caused widespread disruption.

While shares soared, Australia’s residential property market began to recover from cyclical lows.

Property recovery begins

Australian residential property prices rebounded strongly in the second half of 2019, driven by lower mortgage interest rates, a relaxation of bank lending practices and renewed certainty around the taxation of investment property following the May federal election.

According to CoreLogic, national property prices rose 2.3 per cent on average, led by Melbourne and Sydney, both up 5.3 per cent. But the market was patchy. Hobart (3.9 per cent), Canberra (3.1 per cent) and Brisbane (0.3 per cent) all rose, while Darwin (-9.7 per cent), Perth (-6.8 per cent) and Adelaide (-0.2 per cent) remain weak.

When rental income is included, the total return from residential property at a national level was 6.3 per cent. Not a patch on shares but light years ahead of returns from some traditional income investments.

Compare super funds

Read more...

Advertisement
Source: CBA

Interest rates fall …

Retirees and others who rely on income from bank term deposits had another difficult year.

In an (ultimately vain) attempt to stimulate a sluggish economy, the Reserve Bank of Australia (RBA) cut the cash rate three times to a new low of 0.75%. Interest rates for term deposits are generally well below 2%, which means in real terms (after inflation) investors are going backwards.

Lower official rates flowed through to bond markets. In Australia, 10-year government bond yields fell from 2.32% to 1.37% by the end of December. But as yields fall, bond prices rally taking total returns from government bonds to around 8%.

Source: RBA

In the US, 10-year treasury bonds finished the year at 1.92%, while in Japan and much of Europe bond yields remain negative.

The differential between Australian and US bond yields also helped keep the Aussie dollar low. It ended the year close to where it began at US70c.

More than a decade after the financial crisis, monetary policy in the form of interest rate cuts and quantitative easing are still the main tools being used to crank up national economies.

Advertisement

While the RBA became more vocal in its calls for more government spending to boost growth, it also indicated it is prepared to cut the cash rate to as low as 0.25% if necessary. However, it appears this may have spooked consumers and business from spending an investing, rather than the reverse.

… as the economy loses momentum

While Australia is closing in on its 29th successive year of economic expansion, the annual rate of growth slipped to 1.7% in the September quarter.

Inflation is stubbornly low at 1.7%, short of the RBA’s target of 2–3%, and unemployment is stuck around 5.2%. The RBA would like to see the jobless rate fall to around 4.5% to give employees more power to win a wage rise and more incentive to spend.

Despite low interest rates and personal tax cuts mid-year, Australian consumers remained gloomy in the lead-up to Christmas. The Westpac/Melbourne Institute consumer sentiment survey for December fell to 95.1 points, where anything below 100 denotes pessimism.

Source: RBA

The US economy is in relatively good shape, with annual growth ticking along at 2.1% in the September quarter. Whereas China appears to be coming off second best in the ongoing trade war, with growth falling from 6.2% to 6%.

While growth of 6% may be the envy of the western world, it is China’s weakest performance since 1992. As China is Australia’s major trading partner, we also have a lot to lose from a protracted trade war.


Advertisement

As luck would have it, Australia’s trade position was buoyed by rising prices for some of our major commodity exports.

Commodities mostly positive

Prices for our biggest export earner, iron ore surged 28.4% last year to US$92 a tonne after reaching a high of US$124.50 in the wake of Vale’s iron ore mine disaster in Brazil in January.

The price of gold, another major Australian export and a ‘safe haven’ investment in uncertain times, rose 18.9% to around US$1520 an ounce.

Crude oil prices also surged on supply constraints, with the benchmark Brent Crude up more than 20% to US$66 a barrel. As Australia is a net importer of oil, higher prices flowed through to motorists at the petrol pump.

Among the biggest price drops were thermal coal (down 34%) and liquefied natural gas (down 44%).

In the agricultural sector, beef prices leaped 44%, wheat, rice and sugar were also up while prices for wool and cotton fell.

Asset class

Annual % change

Share Indices

All Ords Accumulation

24.1%

All Ords

19.1

ASX 200

18.4%

S&P 500

28.9%

Nasdaq

35.2%

Nikkei 225

18.2%

Shanghai Composite

22.3%

Hang Seng

9.1%

FTSE 100

12.1%

Dax 30

25.5%

CAC 40

26.4%

NZ50 Gross

30.4%

Bonds

Australian 10 Year Bonds

-0.95%

US 10 Year Bonds

-0.76%

Commodities

Iron ore

28.4%

Gold

18.9%

Oil

20.57%

Currencies

$US/$A

-0.7%

The year ahead

Looking ahead, many of the issues facing investors in 2020 are an overhang from 2019.

Despite US President Donald Trump announcing he would sign Phase One of a trade agreement with Beijing, the trade wars are far from resolved. From Australia’s point of view, the impact on China’s economic growth, and hence our own, needs to be monitored.

The possible impeachment of President Trump and the US election later in the year adds another element of unpredictability to existing Middle East tensions and the ongoing trade wars.

While Brexit should be resolved one way or another, there is uncertainty over the outcome of trade negotiations between the UK and European nations.

In Australia, keep a watch and act on interest rates. Many economists expect the RBA will cut rates again, which will result in more pain for investors with bank deposits and support the flight to equities, which are already looking at or near full value.

On the fiscal front, the Morrison Government has signalled it is prepared to drop its focus on delivering a Budget Surplus as it rolls out aid for bushfire affected individuals, farmers and businesses. While the terrible human cost of the bushfires is already apparent, it will take time to comprehend the economic costs to the nation.

As always with investments, there will be financial winners and losers in the year ahead. The best course for investors is to stick to your plan, diversify your assets and stay informed.

Want to learn more about running an SMSF?

Become a SuperGuide Premium member and access expert guides for SMSFs, on topics such as costs, compliance, administration, investment, borrowing and pensions. Discover valuable super and retirement strategies, the most popular shares, managed funds and ETFs for SMSFs, the latest super rates and thresholds, contributions caps and more.

Includes more than 600 articles, how-to guides, checklists, tips, calculators, case studies, quizzes and a monthly newsletter.

Find out more


Learn more about SMSF investment in the following SuperGuide articles:

The importance of asset allocation

February 10, 2021

SMSF investment rules: Collectables and personal use assets

October 15, 2020

What are the SMSF borrowing rules?

August 6, 2020

How to create an SMSF investment strategy (including example documents)

August 6, 2020

How to achieve genuine diversification in an SMSF

August 3, 2020

How do SMSF retirees invest?

March 14, 2020

10 steps to buying a commercial property and leasing it to your SMSF

February 12, 2020

What on earth is an in-specie transfer?

January 15, 2020

How to invest in infrastructure through an SMSF

October 1, 2019

ETFs: How do I use them and what do they cost?

June 19, 2019

SMSF guide to hedging

May 1, 2019

SMSFs and property: A Super Guide

April 5, 2019

The definitive SMSF guide to franked dividends

April 2, 2019

SMSF investment rules: What every trustee should know

February 15, 2019

Related topics

SMSF investing SMSFs

IMPORTANT: All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Learn more

© Copyright SuperGuide 2009-21. Copyright for this article belongs to SuperGuide Pty Ltd, and cannot be reproduced without express and specific consent. Learn more

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

How super works
Super for beginners
Super rules
Employers guide to super
Super contributions
Super and tax
Accessing super
Super news
Women and super
Super tips and strategies
How-to guides
Super quizzes
Superannuation Q&As
Superannuation glossary
Super funds
Best performing super funds
Super fund rankings
Best performing pension funds
Pension fund rankings
Super fund average returns
Super investing strategies
Comparing super funds
Choosing a super fund
Choosing an investment option
Super fund fees
Insurance and super
Super fund profiles
SMSFs
SMSFs for beginners
SMSF administration
SMSF checklists
SMSF compliance
SMSF investing
SMSF pensions
SMSF strategies
SMSF Q&As
Plan your retirement
Retirement planning for beginners
When should I retire?
How long will I live?
How much super do I need?
Will I get the Age Pension?
How much will I spend in retirement?
Financial advice
Retiring overseas
Preparing for retirement
Retirement planning strategies
Retirement calculators and reckoners
In retirement
Income in retirement
Super lump sums
Super pensions
Age Pension
Working in retirement
Life in retirement
Senior concessions and services
Aged care
Estate planning
Super death benefits
Advertisement
Compare super funds

Join SuperGuide Premium and give your retirement plans a boost.

Get access to independent expert commentary on the latest super, retirement and SMSF issues, including the top performing super and pension funds, how much super is enough, the latest super rates and thresholds and new super measures and strategies.

You’ll have access to more than 600 articles, how-to super guides, checklists, tips, calculators, reckoners and other tools, as well as a monthly newsletter.

Find out more

Footer

Important: Disclaimer

All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs.

You should consider whether any information on SuperGuide is appropriate to you before acting on it.

If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

Learn more

About SuperGuide

SuperGuide is Australia’s leading superannuation and retirement planning website. Learn more

Superguide Pty Ltd ATF Superguide Unit Trust as a Corporate Authorised Representative (CAR) is a Corporate Authorised Representative of Independent Financial Advisers Australia, AFSL 464629

  • Contact us
  • Advertise on SuperGuide
  • Careers

Before using this website

  • New to SuperGuide?
  • Terms and Conditions of Use
  • Financial Services Guide
  • Privacy Policy and Privacy Collection
  • Copyright Policy
  • Editorial Policy and Complaints
  • Disclaimer

  • SuperGuide Premium
  • Subscriber feedback
  • Sitemap