The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) fell nearly 7% in 2018. It’s actually fallen by over 11% since the year-high a few months ago.
But, it wasn’t so bad when you include dividends. It also wasn’t too bad as some other share market performances in Europe or Asia.
Thankfully many resource businesses had an impressive December performance, which saved the index somewhat. For example, BHP Group Ltd (ASX: BHP) gained 11.5% in the final month of the year.
I think we can blame two main things that caused the ASX 200 to fall in value in 2018:
Financial Royal Commission
As you probably know, the financial sector makes up a large part of the Australian share market.
In the ASX 50 alone you have the following financial businesses largely focused on the domestic Australian economy feature in the Royal Commission: Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ), AMP Limited (ASX: AMP), Insurance Australia Group Ltd (ASX: IAG) and Suncorp Group Ltd (ASX: SUN).
The recommendations from the Royal Commission are not yet known, but it’s clear that some activities were more profitable than they should have been for the banks. This reduced the immediate profit result and sentiment surrounding the sector. It could be another tough year in 2019 with continued falling house prices.
It’s unavoidable that global problems stemming from the US will affect us one way or another. There were several US-created issues that knocked our share market.
Rising US interest rates have hurt the valuations of Australia’s leading growth shares ASX shares like CSL Limited (ASX: CSL).
Worries about President Trump’s leadership and his trade war with China, which may cause global economic growth to halt, damaged businesses like Amcor Limited (ASX: AMC) and Macquarie Group Ltd (ASX: MQG).
Whatever your view on the above problems, it has caused the Australian share market to now trade at a cheaper price. Many businesses are looking cheaper.
Despite people being more fearful, it’s probably the most attractive time to buy since early 2017 or even 2016. You just have to find the right opportunities, but I wouldn’t call CSL or CBA a bargain yet.
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Insurance Australia Group Limited and National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.