FY16 – A Tale of 2 Halves

Today marks the end of the financial year for most here in Australia.  In review it was a year of two halves.

In the first half we had the lead up to the US Fed’s much anticipated rate rise, the first in 9 years, delivered on 16 December, and the lead up of which put pressure on gold and silver prices.  Prior to that we had the turmoil in China’s sharemarket which dropped 30% over just 3 weeks in July.  That hit the world stage when they shocked global markets with an historic devaluation of the Yuan and we saw “Black Monday” on 24 August when Chinese shares dropped a further 8.5%.  This precipitated big losses around global sharemarkets.

The ASX200 finished the first half 2.6% down, Gold 5.1% down and Silver 7.3% down.  This was a market confused between global market turmoil but the US Fed saying everything is awesome and we are going to raise rates.  The former weighed down Aussie shares and the latter weighed down gold and silver.  Not many winners.

The second half is a very different story.  The theme of the second half (first half of calendar year 2016) was clearly that everything is not as awesome as the US Fed wanted us to believe, that even that little 0.25% rate rise in December was weighing on markets, and maybe these guys have lost control.  China shocked with another big devaluation in January and down came sharemarkets again.  We saw massive inflows into ‘investment’ gold and silver and corresponding price rises.  This half also included Brexit which may or may not be the thing that causes the central-bank-stimulus-inflated-strung-out-markets to collapse, but certainly illustrated to everyone this is a fragile global economic setup.  

The ASX200 finished down a further 3.3% (down 5.9% for FY16), Gold surged 21.5% (up 15.3% for FY16), and likewise Silver up 29.3% (up 19.9% for FY16).

So shares have been a marvellous tax minimisation strategy (if you sell today) but FY16 may well go down in history as the year the broader investment public started to see that we could well be in the terminal stages of the biggest credit cycle in history and started to prepare themselves accordingly by buying gold and silver.  

(For new readers have a look at these 2 recent posts (here & here) regarding this credit cycle and gold).