By Daniel Archibald | CFA
Thursday, 1 November 2007. This was the day that the All Ordinaries hit its all-time high of 6873.20 and the S&P/ASX200 got to 6828.70. It was an otherwise uneventful day, with most of Australia's attention focussed on the Howard vs Rudd federal election and the preparations for the Melbourne Cup. The Dow had recently hit its historical high of just over 14,000 and most of the world's equity markets were feeling a little pricey.
Within 18 months, the All Ords would be back to 3000, the level it broke 8 years earlier. It took about 4 years for the market to return and stay above the 500 level. And on 1 November 2017, exactly 10 years on from its record high, the All Ords jumped back above the 6000 level, after spending 4.5 years trading between 5000 and 6000 points. However, this is still over 10% below its 2007 record.
In comparison, most of the developed economy markets have easily surpassed their 2007 high. The FTSE (UK) is 10% above where it was 10 years ago, whist the Nikkei (Japan) is 30% higher. The best performer has been the US, with the S&P500 about 70% beyond where it was in November 2007.
With hindsight, the Australian equity market looked to be in a bubble in 2007. It had doubled in price over the preceding few years, outperforming most other markets by a long way. This is likely the reason for the large underperformance since 2007, with Australian shares moving back in line with their global counterparts.
The past 10 years has seen many stocks unable to regain their 2007 highs, but there have also been some winners. A review of some of the market's biggest companies reveals that the last 10 years has been quite a mixed bag of performance:
- BHP's 2007 highs were halved by the end of 2008, but it was back at its 2007 high by 2011. This, of course, coincided with the ramp up in Chinese infrastructure spending. Since then, the price has fallen back to 2008 levels
- CBA's 2007 high was surpassed in 2012 and it was almost double its 2007 high by 2015. Since then it has come back about 20%. ANZ has not fared so well, currently trading around its 2007 high.
- The fall in WOW's share price, being a consumer staple, was far less precipitous. WOW also regained its 2007 high by 2012, but its share price actually fell below 2008 lows in 2015. WES fell much more and regained is 2007 level by 2013, but has not moved far from there since.
- It took BXB until 2016 to finally get back to 2007 levels, but CSL is multiples above where it was in 2007. FXJ is a fraction of its 2007 price. At one stage in 2015, TLS was 50% higher than its 2007 high, but now it is about 30% off its 2007 levels. DMP is multiples above its 2007 price, despite almost halving in value since 2016.
When the All Ords will hit a new record high is anyone's guess. 10 years on and it seems to be edging closer. But remember, the US took 14 years to break through its 1999/2000 highs and the Nikkei is still over 40% below its high of almost 30 years ago. Only time will tell.