The Australian share market has delivered its strongest returns in three years, overcoming major global shocks to rise seven per cent in 2016.
Despite a poor start to the year, and massive fluctuations caused by unprecedented political uncertainty, the S&P/ASX200 index put in its best performance since a 15 per cent gain in 2013.
“It has been an interesting and unique year, full of many surprises,” CommSec market analyst Steven Daghlian said.
The disappointment that has harrowed long-term investors over the two previous years looked to be continuing in the early stages of 2016.
A collapse in commodities prices to multi-year lows pushed the ASX200 index to a low of 4,706 in February, the worst start to a calendar year in the index’s history.
However, China’s unexpectedly vigorous fiscal stimulus in March triggered a bounce, as it led to a strong recovery in iron ore, coal and base metals prices.
A partial recovery in oil prices has also been sustained after OPEC and other producers reached their first deal since 2001 to jointly reduce output in order to rein in oversupply.
Major political surprises then took hold, with the shock British vote to leave the European Union followed by the unexpected election of political novice Donald Trump as US President.
Traders quickly adjusted to the changing tide though, with expectations that Trump’s policies will boost growth, and projections of several US Federal Reserve interest rate increases in 2017, fuelling a global markets rally to close 2016.
That has helped the ASX200 index reach a 16-month high in the final week of the year.
The local market’s best-performing sectors have been the previously battered materials sector, up 39 per cent, and energy, up 14 per cent.
Banks rose 5.4 per cent, industrials gained 8.2 per cent and consumer related stocks improved by 8.5 per cent.
The worst-performing sectors were the defensive sectors like telcos, down 10.5 per cent, and healthcare, up just 0.5 per cent.
The best-performing stocks included gold miner Resolute Mining, which is more five times its value at this time last year, while Whitehaven Coal and Andrew Forrest’s iron ore giant Fortescue Metals Group more than tripled in value.
The worst performers included biotech firm Sirtex Medical, which has plunged 64 per cent, aged care provider Estia Health dropped 63 per cent and baby formula maker Bellamy’s – 57 per cent weaker.