The latest edition of our fortnightly email newsletter was sent to subscribers on the 5th of August. This edition looked at dollar cost averaging, provided a summary of the movements in markets over the past fortnight and looked at investing for income. If you would like to be added to the mailing list please click the following link to be taken to the sign up page - The Financial Fortnight That Was Sign Up Page.
The latest edition also contained the following Market Update:
ASX P/E Ratio and Dividend Yields
The P/E ratio is a common broad indicator of the price of shares. It is a calculation of the price of shares compared to expected earnings. A higher ratio indicates that share prices are more expensive. The historical P/E ratio for the ASX has been between 14 & 15. The dividend yield is the calculation of dividend payments divided by the market capitalisation of the company or index. The historical average in Australia is around 4%.
As of July 31st the P/E ratio for the S&P/ASX 200 was 11.01. The dividend yield was 4.69%.
Since our previous edition, Australian and global sharemarkets and \ listed property have experienced mixed movements. The S&P ASX200 Index has fallen a further 1.52% from the 11th of July to the 1st of August. It is now down 17.46% from the same time last year and down 22.65% for the calendar year (2008) so far. Conversely, the MSCI World - ex Australia, a measure of the global market, has risen 1.54% over the same period. The index is down 16.60% from the same time last year and down 16.23% for the calendar year so far.
Emerging markets have experienced negative movement with the MSCI Emerging Markets Index falling 1.94% since the 11th of July. This index is down 8.39% from the same time last year and down 19.09% for the calendar year so far.
Property trusts have rebounded a touch since the 11th of July with the S&P ASX 200 A-Reit Index rising by 7.85%. The index is down 39.32% from the same time last year and also down 36.17% for the calendar year so far. The S&P/Citigroup Global Real Estate Investment Trust (REIT) Index, a measure of the global property market, has risen 7.55% over the same period. It is down 16.52% from the same time last year and down 11.92% for the calendar year so far.
As of 4pm the 1st of August, the value of the Australian dollar has fallen against major benchmarks since the last edition. It is down against the US Dollar by 2.37% at .9374. It is up 10.88% from the same time last year and up 6.33% for the calendar year so far. Since July 11th the Aussie has also fallen 1.92% against the Trade Weighted Index now at 71.7. This puts it up by 5.50% since the same time last year and up 4.37% for the calendar year so far. (The Trade Weighted Index measures The Australian dollar against a basket of foreign currencies.)
Since our last edition the Australian Bureau of Statistics has released the latest employment data with the official unemployment rate falling slightly to 4.2% as of the end of June. The participation rate has risen slightly to 65.3% with employment levels rising by 29,800 jobs.
The ABS has also published the latest Consumer Price Index data measuring inflation in the economy. The CPI rose 1.5% during the June quarter and now sits at an annualised rate of 4.5%.
The ABS has also released heir Established House Price Index across capital cities. The index has seen a 0.3% fall in the weighted average house prices of the eight capital cities leaving the annualised rate at a 8.2% rise.
The Reserve Bank of Australia board also met on the 1st of July and decided to keep the official interest rate target steady at 7.25%. The statement published with the decision indicated that the RBA believes that there are tentative signs that inflationary pressures are easing slightly. Since then, effective mortgage rates have actually risen due to increases passed on by individual banks in the system. The board meets again today to set the official cash rate.