If we look back at how investment markets performed, surprisingly it wasn’t too bad. The graph below shows the return of each of the major asset classes for the calendar year. This is the first time in a while that the return from growth (or higher risk) assets consistently outperformed the defensive markets of cash and fixed interest. What that means for investors is, “Those who were prepared to take on extra risk, were rewarded!”
One of the biggest surprises of the year in domestic markets was the reversal of the Resources sector. This sector of the market helped navigate Australia away from a recession during the GFC in 2008/09, however the dream run came to end in 2012 as we saw the price of most commodities start to collapse.
This coincided with a halt in mining exploration and new mine developments.
But in early 2016 commodity prices began to climb. The table below shows the price increase of a number of key commodities for the 2016 calendar year.
These price increases have helped the Resources sector return 40% for the year. Not only did we struggle to see this rebound, so did a large number of Australian Share managers. Most Australian share funds were underweight the resources sector and have under performed the index as a result.