Share Market Wrap 23rd March 2007

Over the past week I have undertaken quite a bit research on the history of our market and I have to say the results are interesting. If we look at the All Ordinaries Index for the 15 year period following the market crash in 1987 to December 2002 the annual compounded return was 5.57%. If we include the current bull market that started in March 2003 the return increases to 8.55%. If we only look at the last 4 years on our market, the annual compounded return increases to 20%, and over the last 19 years there have been two other periods where these returns were possible on our market. This reinforces the fact that timing the market is far more profitable than time in the market and supports my argument that the market only rises for one third of the time while for the remainder it either falls or travels sideways.

What is even more interesting is that if all an investor had done was hold the top 20 shares on the Australian market for the last 10 years they would have achieved an annual compounded return of 9.58% (excluding income from dividends). This in comparison to the annual compounded return achieved within the managed fund industry which equates to 8.4% including dividends for the same period. This begs the question as to whether the managed fund industry really deserves the kudos they are given when it comes to managing funds on behalf of clients.

So what’s happening on the market?

I stated in my last report that given the recent weakness in the market it was more likely that the market would travel down over the coming weeks. However, following the strong move up that occurred on our market yesterday it looks as though the All Ordinaries will travel up for two to four weeks from the low on 6 March, which was my original expectation earlier this month. That said there is strong resistance around 5939 points therefore the market needs to trade strongly through this level before it indicates that it will break through the previous all time high of 6024 points. If the market does break through the previous all time high, I believe it will peak between the 6th and 13th of April.

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