A rally from the bottom of the market can create a false signal that markets have rallied too far and too fast, so it’s worth being clear on the numbers. We are not even half way back yet.

From its low point of 3112 (6 March 2009) to the present level of 4541, the Australian All Ordinaries Index has risen by 46 per cent. But the current level is still 34 per cent lower than its November 2007 high.

In other words, the rally has only recovered a little more than one third of the decline. The Australian sharemarket still needs to rally another 51 per cent from current levels to return to its previous high.

In this Point of View, AXA’s Chief Investment Officer Mark Dutton looks at what’s behind the rally to help assess its sustainability over the longer-term.

View a copy of Mark Dutton's Point of view.

pov_sept_2009.pdf (70.7kb)