Australia best long-term performer among developed sharemarkets

The Australian equities market has been the best performing developed sharemarket over the past 111 years.

“It has posted a real return of 7.4% a year since 1900,” noted Paul Taylor, Head of Australian Equities at Fidelity and Portfolio Manager of the Fidelity Australian Equities Fund.

“If you invested $1 in the Australian market in 1900 it would be worth A$3,054 at the beginning of this year.”

Australia outperformed other major markets such as the US and the UK. South Africa was the next closest performer, as shown below, followed by Sweden then the US.

The maximum return of the local equity market was 51.5% in 1983, according to the research by the team from the London Business School. The minimum return of the market was -42.5% in 2008.

Mr Taylor attributed the long-term outperformance of the Australian equities market to five factors:
– strong population growth
– good natural resource base, 
– good corporate governance, 
– high dividend yield
– high real dividend growth.

“These factors are still very much in place,” he said today.

“The Australian market is attractively valued at well below long-term average levels in terms of earnings, dividend yield and valuation levels. Over the past year the macro economic concerns have overshadowed bottom-up fundamentals and company valuations. At some stage they will revert to the mean.”