The year in review: The Australian share market is a tale of two halves
As the financial year comes to a close, the ASX closes on a positive note
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The benchmark index of the Australian share market, the ASX 200, is up by 7.72 percent at 7,759.6 points in the financial year-to-date as the final day of trading gets underway. Following a positive trading session on Wall Street overnight, the ASX 200 was expected to open higher today.
FY24 has been a tale of two halves, with the ASX 200 drifting down from July to October and hitting a 52-week low of 6,751.3 points on 30 October. A rally began in November as speculation of interest rate cuts in the United States and Australia began following substantial falls in inflation and growing excitement over artificial intelligence and its potential to meaningfully raise productivity worldwide.
The ASX 200 ascended to an all-time high of 7,910.5 points in April, following new records also set in the United States for the S&P 500 and NASDAQ Composite indexes at the time (these US market records have since been superseded). The S&P 500 and NASDAQ Composite have outperformed the Australian share market by more than 3:1 in FY24. The S&P 500 is up 23.2 percent and the NASDAQ is up 29.5 percent in the financial year-to-date.
Powering the NASDAQ’s performance has been the ‘Magnificent Seven’ stocks of Alphabet, Amazon, Meta Platforms, Apple, Nvidia, Microsoft, and Tesla. Nvidia is the leader of the pack for share price growth, having revolutionised the global IT industry with its graphics processing units (GPUs) that accelerate computing and have become essential in supporting artificial intelligence. Its GPU chips power programs like ChatGPT. Nvidia stock is up 193 percent in FY24 due to sensational earnings growth.
On the ASX 200, the stocks that have risen the most over FY24 are cancer radiopharmaceutical company Clarity Pharmaceuticals (up 624 percent), buy now, pay later provider Zip Co (up 265 percent), social networking app developer Life360 (up 113 percent), medical imaging software developer Pro Medicus (up 113 percent) and gold miner Red 5 (up 95 percent).
All of the ASX 200 bank shares except Bank of Queensland hit multi-year high share prices in FY24, with National Australia Bank leading the pack with a 37 percent gain. Top broker Goldman Sachs has described Australian banks as the most expensive bank stocks in the world and “in uncharted valuation territory” at today’s share prices. This week, the Commonwealth Bank came very close to overtaking mining behemoth BHP as Australia’s most valuable company by market capitalisation, after reaching a 52-week high of $128.68per share on Tuesday.
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The federal budget has rattled property investors. But the biggest mistake isn’t the tax changes, it’s the conclusion many are drawing from them.
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The recent budget has forced a reckoning for property investors.
Negative gearing now restricted to new residential builds, the CGT discount gone and on paper, the numbers look different.
And many investors are responding by pivoting toward yield, prioritising cash flow over capital growth in a way that property strategists say misses the point entirely.
“The debate has shifted to yield versus growth as if they are opposing forces,” says Abdullah Nouh, founder of Melbourne-based buyers’ agency Mecca Property Group. “But that framing is itself the mistake.”
Nouh, who works with high-net-worth families and investors on long-term acquisition strategy, argues that capital growth remains the primary driver of genuine wealth creation and that the post-budget environment has made quality assets more important, not less.
The numbers make his case plainly. An additional $500 per week in rental income is welcome. A prestige asset appreciating by $1 million over a market cycle is transformative.
These are not equivalent outcomes, and portfolios built around yield at the expense of location and land value tend to generate income while wealth stands largely still.
The more nuanced shift Nouh is seeing among sophisticated investors is a move toward assets where both outcomes can be engineered simultaneously – established homes on substantial land in quality locations, where the existing dwelling can be repositioned, rental returns improved, and the underlying land value compounds independent of what sits on it.
For investors with existing equity, commercial property is also entering the conversation in a more serious way.
Prestige industrial assets, medical centres and long-leased essential retail offer income profiles that residential property in most capital city markets cannot currently match: longer lease terms, tenants covering outgoings, and greater predictability than the residential tenancy cycle.
“The investors who build lasting wealth are rarely the ones who chased yield or growth exclusively,” says Nouh.
“They are the ones who built a strategy they could sustain – one that generated enough income to hold quality assets through multiple cycles while those assets compounded in value.”
The budget has changed the settings. It has not changed the fundamentals.
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