Australia's longest bear market? There is definitely a sense of deja vu about the current equities market environment. With the recent pullback all but a distant memory much commentary is again talking about the slow grind higher for Australian equities. The chart attached from Frank MacIndoe at JB Were highlights the sluggish performance of the ASX200 compared to the S&P500 over the past seven years. The article on the following links looks at a number of factors that could be contributing to this under performance. This includes the relative attractiveness of cash rates, shifting demographics and high levels of personal indebtedness. MacIndoe also highlights that one conclusion could be that Australian equities are simply cheap. He uses Robert Shillers 'cyclically-adjusted price/earnings ratio' (CAPE) to illustrate why there is plenty of room for Australian equities to rise before they reach long term average levels. Article via Cuffelinks (VIEW LINK)
The one glaring omission from this report is the currency movement. It is comparing nominal performance when the two indices are priced in different currencies - the S&P 500 in USD, the ASX 200 in AUD. When comparing the performance of any two asset classes it must be done using the same metric to gauge the 'real' return.
Are you able to reproduce the same chart corrected for the currencies?