FEW would argue that the sharemarket has put in a remarkable performance over the past financial year.
The benchmark S&P/ASX 200 Index fell by more than 2000 points within eight months, losing nearly 40 per cent of its value as many investors viewed a collapse of the global financial system as a real possibility after large American banks started filing for bankruptcy.
While there has been a recovery in recent months, few analysts are confident the market will not fall again.
Rob Patterson, managing director of Argo Investments, which has about $3 billion invested in the local sharemarket, describes the past year as "difficult".
"There was plenty of fear that the global financial system might collapse," he said. "I suspect there were a lot of people in the market that had never seen anything like this.
"I happen to be old enough to have seen a fair lot of things, but certainly the protracted nature of the falls and the fear of collapse of the global financial system was something I had never seen.
"It was just proof that fundamentals do not necessarily drive markets, that sentiment is very important."
The sharemarket had still not recovered from the falls of the first eight months, he said, because credit markets had not returned to normal and the domestic economy was still deteriorating.
The S&P/ASX 200 stood at 5138 points at the start of the 2008-09 financial year.
The extent of the subprime crisis was still being debated by fiscal policymakers when the US Federal Reserve suddenly moved to rescue Fannie Mae and Freddie Mac, the two government-backed mortgage lenders that were close to collapse because of non-performing loans.
The subprime crisis truly became a financial crisis when Lehman Brothers filed for bankruptcy on September 15 and banks stopped lending to each other.
The US Government announced huge rescue packages for JPMorgan, AIG and Bank of America.
The sharemarket was then in sheer panic. Investors headed for the exit in droves and stock prices, particularly in the financial sector, dropped sharply.
The year's biggest falls in the S&P/ASX 200 were a 10.5 per cent decline in September last year and a 12.7 per cent decline in October.
The single worst day was October 10, when the index plunged by 8.3 per cent from 4275 points to 3960.
The market picked up in early November, but when the US Government appeared to hesitate over whether to provide further rescue packages, the panic returned and the index fell below 3500 in late November — its lowest point in five years.
From there it staged another rally, only to resume its downturn in early January. That decline lasted two months: the benchmark index hit an intra-day low of 3120 on March 10, down 40 per cent from the start of the financial year.
"What the heavy market falls in the last year remind us is that at the end of the day fundamental underlying earnings are always the most important factor applicable to a company," Whitefund Management managing director Angus Gluskie said. "It reminds us not to get caught up with short-term sentiment when (the market) is overly buoyant."
Mr Gluskie sums up the past financial year as a "surprisingly torrid period which reminds us all about the importance of fundamentals".
