It's been a bumpy ride for Australian investors in 2014. While equity markets around the globe have soared to never-before-seen heights, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has moved sideways in a rather rollercoaster-like fashion. However, a late Santa rally has provided a much needed spark with the index now looking set to finish the year 1.3% higher at around 5420 points.
Source: Google Finance
Here are five of the biggest events that shaped the Australian share market in 2014:
Commodities
Indeed, the plummeting iron ore and oil prices were one of the biggest factors impacting the economy and sharemarket over the last 12 months. Increasing supply from miners such as BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO), combined with weakening demand from China, saw the iron ore price plunge more than 47% since the beginning of the year.
The oil price faced a similar issue with global supply far outpacing demand. Brent oil, the global benchmark, has nearly halved in value since June which has reaped havoc on the energy sector. Qantas Airways Limited (ASX: QAN) has certainly benefited however thanks to lower petrol prices with the stock up more than 90% over the last six months.
IPOs
Plenty of corporations took advantage of the market's sentiment by listing on the ASX over the last year. While companies like Healthscope Ltd (ASX: HSO) and iSentia Group Ltd (ASX: ISD) have enjoyed strong debuts, no float received as much hype as health insurer Medibank Private Ltd (ASX: MPL). In what was a heavily oversubscribed float, the sale of Medibank raised the government roughly $5.7 billion. While mum and dad investors were sold the stock for $2.00, it has since risen to $2.43 – a 21.5% paper profit.
Free Trade Agreement
The Australian government reached a historic Free Trade Agreement with China earlier in the year, as well as agreements with Korea and Japan. The Chinese deal will see a huge reduction in the tariffs currently applied to various Australian exports with some of the biggest beneficiaries to be in the agriculture and dairy industries. With China's population tipped to continue skyrocketing, this could be huge for companies like Bega Cheese Ltd (ASX: BGA) and Select Harvests Limited (ASX: SHV).
The Financial System Inquiry
The results of the Financial System Inquiry were released earlier this month, unveiling 44 recommendations. Among them were the proposal for Australia's big four banks to hold more capital in reserve as a safeguard against another economic downturn, while SMSFs may also be banned from borrowing to invest in property.
Interest Rates
The Reserve Bank held interest rates at just 2.5% over the course of the year which saw investors flock towards some of Australia's best dividend stocks. Commonwealth Bank of Australia (ASX: CBA), which is Australia's largest bank, recently recorded a fresh all-time high price while Telstra Corporation Ltd (ASX: TLS) managed to hit a new 13-year high at $6.03.
With unemployment levels rising however, analysts are now expecting the RBA to cut rates at least once in 2015, while some say they could drop to just 2%. If that scenario were to play out, you can expect plenty more action on the dividend front in the New Year.