We ended the week lower but managed to hold on to some of the gain from the previous week. Continued talk of a housing bubble, negative gearing still an issue and Dick Smith closing the doors because they cannot find a buyer had investors being cautious short term.
It is easy to take a negative short term view, but let’s look at the big picture. In March 2009 saw the market bottom at 3150 points. Next week is the 7 year anniversary of this low, on Friday the market closed at 4880 this is a gain of 55% or 7.85% per annum since the lows. Overall the market has performed quite well over the past 7 years.
The 1987 crash started in September 1987 when the market topped at 2375 it was not until December 1997 that we saw the market at this level again. What is interesting is that the market reached 2300 points in January 1994 (just over 6 years after the initial drop) before falling away for the next 12 months until February 1995 when it finally started its two year recovers back to pre-crash level.
Fast forward to today, the market topped in August 2007 at 6800 points since then the highest it has been is 6000 points in April 2015 (just over 7 years from the initial drop) since then it has drifted lower. If we use history is our guide, our market only has months left before we see the end of this down leg and the march back to 6800 points begin.
The patterns between the two most recent crashes are very similar, indicating that our market should reach 6800 points in the next 3-4 years.