All Ordinaries passes all time pre-GFC high
The Australian share market has gone from strength to strength in 2019, posting gains in each of the seven months since the start of the new year. These gains collectively have pushed the All Ordinaries Index (the 500 largest listed Australian companies) up an impressive 20.8%, to reach a new all-time high of 6,958.7 in July. This is the first time since the Global Financial Crisis more than 11 years ago that the All Ordinaries index has reached these levels.
The strength in the Australian share market has been due to a number of factors both at home and overseas. In Australia, the unexpected Coalition victory in the Federal Election resulted in there being no changes to negative gearing which helped to support a weak housing market that had been placing a strain on the economy. The Coalition victory also provided some relief to the share market as Labor’s tough stance on the banks could have seen increased regulation and higher levies, both of which would have put increased pressure on profits.
In the second half of last year, the US Federal Reserve spooked share markets by increasing interest rates and indicating they had intentions of raising interest rates even further if conditions were right. Ever since then, investors globally have continued to pay close attention to statements made by the Fed around their view on the likely direction and size of any future changes in interest rates. As 2019 progressed, the Fed made statements suggesting they would be open to cutting rates if they felt the economy needed a boost as the ongoing US-China trade dispute threatened to take a toll on the US economy. These statements gave investors confidence that the Fed would step in to take action if the economy began to show signs of slowing down.