Putting local and international financial markets into context Prepared by BT Financial Group for...

Putting local and international financial markets into context

Prepared by BT Financial Group for the adviser marketUpdated to 31 July 2009

4. A quick look at the different asset classes

1. Australian share markets – the 1, 10 and 50 year view

3. Have we seen the bottom in share markets?

5. Simple super strategies

2. How have international markets fared?

3

Source: BT Financial Group, Premium Data

S&P/ASX 300 Accumulation Index – 12 months to 31 July 2009

The Australian share market has fallen 10.3% in the past 12 months…

Series Rebased: 31 July 2008 = 100

31 Jul 08 30 Sep 08 30 Nov 08 31 Jan 09 31 Mar 09 31 May 09 31 Jul 09

4


S&P/ASX 300 Accumulation Index – 10 years to 31 July 2009

…but is still up 117% over the past 10 years


Jul-99 Jul-01 Jul-03 Jul-05 Jul-07 Jul-09

Annual returns of Australian shares (%) – All Ords / S&P ASX 300 Accumulation Index (since 1956)

Volatility can hurt returns in the short-term…

5

Source: Standard & Poor’s

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Rolling 5-year returns of Australian shares (% annualised) – All Ords / S&P ASX 300 Accumulation Index (since 1960)

…but it’s a different picture over the longer term...

6


1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Rolling 10-year returns of Australian shares (% annualised) – All Ords / S&P ASX 300 Accumulation Index (since 1966)


...and the longer the better!

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1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2008 was a ‘1 in 50’ year event for the Australian share market...


All Ords / ASX 300 Accumulation Index – 50 years to 2008

2007

2003

2001

1999 2006

1998 2005

2002 1997 2004 1993

1994 1996 1995 1985

1992 2000 1989 1978 1980

1990 1987 1976 1988 1977 1979

1982 1984 1971 1969 1972 1968

1974 1981 1965 1964 1966 1963 1967 1983

2008 1973 1970 1960 1962 1961 1958 1991 1959 1986 1975

-40 to -30 -30 to -20 -20 to -10 -10 to 0 0 to 10 10 to 20 20 to 30 30 to 40 40 to 50 50 to 60 60 to 70

...but every period of negative returns is often followed by increased gains


All Ords / ASX 300 Accumulation Index – 50 years to 2008

2007

2003

2001

1999 2006

1998 2005

2002 1997 2004 1993

1994 2009 1996 1995 1985

1992 2000 1989 1978 1980

1990 1987 1976 1988 1977 1979

1982 1984 1971 1969 1972 1968

1974 1981 1965 1964 1966 1963 1967 1983

2008 1973 1970 1960 1962 1961 1958 1991 1959 1986 1975

-40 to -30 -30 to -20 -20 to -10 -10 to 0 0 to 10 10 to 20 20 to 30 30 to 40 40 to 50 50 to 60 60 to 70

2009 YTD +19.7%

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The major international markets have also fallen considerably in the past 12 months


FTSE 100 (UK) -14.8%, Nikkei 225 (Japan) -22.6%, S&P500 (US) -22.1%, DJ Euro Stoxx 50 (Europe) -21.7%


And it’s no wonder why – the linchpin of the global economy had its worst year in more than 50 years

Source: Value Square Asset Management, Yale University

The US S&P 500 Index – 50 years to 2008

2006

2007 2004 2003

2005 1988 1999

1994 1986 1998

1993 1979 1996 1997

2000 1992 1972 1983 1995

1990 1987 1971 1982 1991

1981 1984 1968 1976 1989

2001 1977 1978 1965 1967 1985

2002 1973 1969 1970 1964 1963 1980

2008 1974 1966 1962 1960 1959 1961 1975 1958

-40 to -30 -30 to -20 -20 to -10 -10 to 0 0 to 10 10 to 20 20 to 30 30 to 40 40 to 50

14


S&P/ASX 300 Accumulation Index – 2 years to 31 July 2009

We believe we’ve seen the bottom of the ‘bear market’ that started back in 2007


High point: 1 November 2007

Low point: 6 March 2009

Jul-07 Oct-07 Jan-08 Apr-08 Jan-09 Apr-09 Jul-09Jul-08 Oct-08

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Source: BT Financial Group, Australian Securities Exchange

History shows us that bear markets are generally followed by a lengthy rally

Date Market fallLength of bear

marketMarket rise

Length of market rally

May 1992 – November 1992 -20% 6 mths 73% 15 mths

February 1994 – October 1994 -23% 10 mths 28% 15 mths

September 1997 – October 1997 -20% 1 mth 31% 6 mths

March 2002 – March 2003 -22% 12 mths 55% 24 mths

November 2007 – March 2009 -51% 16 mths ? ?

Last five Australian bear markets (S&P/ASX All Ordinaries Index)

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The major international markets are also showing signs of a turnaround


FTSE 100 (UK), Nikkei 225 (Japan), S&P500 (US), DJ Euro Stoxx 50 (Europe)


Low point: 6 March 2009

Growth assets have been the most affected by the rise in market volatility in the past year

Source: BT Financial Group

Cash

International listed property – hedged

Australian bonds

International shares - hedged

Australian shares

International bonds - hedged

Australian listed property

International shares

12 months to 31 July 2009

12 months to 31 July 2008

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While cash saw stronger returns this past year, Aussie shares still outperform over the long-term

Note: Accumulated returns based on $1,000 invested in December 1984Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, UBS Bank Bill 0+ years

31 July 2009

Australian bonds

Listed property

Australian shares

Cash

Global shares

20


Australian dollar vs US dollar – 12 months to 31 July 2009

The Australian dollar has continued to make strong gains against the US dollar since last October


Low point: 27 October 2008

You and your superSimple strategies for the new financial year

Which super investment is right for you?

“… Over the long term, experts agree that higher risk assets – like shares – should generate a higher return than low risk assets, like cash …”

“…. If you’re young, you have different requirements to someone approaching retirement, so it may be a balanced fund isn’t the best option…” Melanie Evans, Head of Super, BT Financial Group

“ … Investing in the safety of a conservative fund can be a smart strategy if you’re older and want to protect your super as you approach retirement. If you still have a substantial amount of time before you retire, moving to a conservative fund may not be a suitable choice ...”

Patrick Farrell, Head of Investment Solutions, BT Financial Group

BT Super Investor newsletter, July 2009

You have a big choice in who manages your super

YouChoose how your super is invested based on the different investment options offered within your super fund.

Investment professionalsInvest your super across different types of asset classes - like shares, property, cash and bonds - depending on your investment choices.

The upside of being young: time is on your side

The 10-year savings plan

At the age of 31 you decide to make a personal contribution of $5,000 into your super and then add to it at the rate of $1,000 each year – until you turn 40.

Then you stop making contributions and leave your super alone until you retire at 65. Let’s assume that you earn and average of 8% pa after fees and taxes.


At the age of 41, you decide to put aside $5,000 and add $1,000 each year until you turn 65 in belief that you will make up for lost time by saving harder over 25 years rather than 10 years.

Which is the better strategy?



The 10-year saving plan, in which you will have invested a mere $14,000 – a $5,000 initial contribution then $1,000 a year for nine years – will earn you an additional $153,972 in your super.


The 25-year plan, in which you will have invested $29,000 more than twice as much, earns you considerably less: $98,471.

The moral here is simple. If you start building your super balance sooner, it has the potential to grow bigger – often with less effort. But if you start later, you may need to contribute a lot more, just to reach the same level.

Assumptions:i_Assumes an initial investment of $5,000 into superannuation and then ongoing $1,000 contributions made at the end of each year.ii_Assumes 0% inflation and 8% per annum average return after fees and taxes.This scenario has been developed for illustrative purposes only and cannot be relied on as an indication or prediction of future results.

Which is the better strategy?


Here are some of ways that you can take advantage of compounding to grow your super:

Consolidate your super into one account: the money you save in multiple fees could stay invested and really help grow your overall super balance.

Add more to your super (if you can): By adding more money to your account each year - above the 9% you normally receive from your employer – you’ll give your super the opportunity to grow faster and bigger.

Hold your investment over time: if you sell or switch your investments, you’ll lose the effect of compounding and may crystallise losses.

Get compounding working harder for your super

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This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ and is for general information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The presentation has been prepared without taking into account any personal objectives, financial situation or needs. It does not contain and is not to be taken as containing any securities advice or securities recommendation. Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice. BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation. Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee. It is important to note that past performance is not a reliable indicator of future performance.

This document was accompanied by an oral presentation, and is not a complete record of the discussion held.

No part of this presentation should be used elsewhere without prior consent from the author.

For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney time)

Putting local and international financial markets into context Prepared by BT Financial Group for...

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