The saying that when the US market catches a cold, the Australian develops pneumonia, has certainly proved to be true for the effects of the Global Financial Market (GFC).
I have posted monthly charts for the US Dow Jones Industrial Average (DJI) and the S&P, ASX 200 Index (XJO) for comparison. The difference is astounding. It shows how much better off an Australia investor would have been to transfer their Aussie market assets to the US in 2009, when the down-turn was at its worst.
- Both the onset and the nadir of the GFC occurred almost simultaneously in Australia and the US.
- Surprisingly perhaps the percentage decline in both indices were the same at 54.4%.
- The DJI surpassed the GFC in the month of April, 2013, 5.5 years after its onset, and 4 years after the low. Furthermore in the 4 years since, the index has soared 46% to be 20,728.5 on March 30, 2017.
- The XJO by way of contrast, although on an uptrend, is still 9.5 years later about 14% below the pre-GFC high, and is yet to break resistance at 6000; although at 5900 currently, it is not far off achieving this goal.
I’m not qualified to say why the two markets are so different, (about 60%) but I suspect that a significant factor has been the greater liquidity in the US from quantitative easing of the financial markets. I understand the UK pursued a similar policy.