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Forget all predictions: History does rhyme on the ASX

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Climbing a wall of worry...

"They said you'd never make it," went the 80s beer ad, "but you finally came through".

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ASX winners and losers - a snapshot

The stand out listings traded on the ASX captured at key moments through the day, as indicated by the time stamp in the video.

Which, while relevant almost every year, can certainly be said of the financial year which came to a close on Friday.

As accountants nurse their Financial New Year's Eve hangovers this weekend, we can tally the gains of the 2016-17 financial year. The ASX 200 put on 9.3 per cent since June 30 last year, with its returns rising to 14 per cent when dividends are included, according to Standard & Poor's.

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Which, believe it or not, is well above the yearly average return for the ASX. Layer on franking credits, and it's been a pretty good year for investors.

Despite the worries.

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You only have to cast your mind back 12 months, to the Brexit vote that (temporarily) shook the markets. That was in June 2016, and many people worried that would set the tone for the financial year that followed.

In July 2016, CNN wrote "...stocks are at record highs, the markets aren't exactly going gangbusters." There was no shortage of experts adding their voices to why the market was in for a tough time.

In November… well, we all know what happened. A US election that was supposed to shake the financial world.

The new year bought its own challenges, with Zacks closing out the month of January with the observation "The Dow, nevertheless, logged its worst daily loss since mid-October on Monday, while a popular measure of Wall Street fear climbed to its highest level in about three months."

And May 1 ended up being the highest point for the year. Since then, concerns about resource prices and bank profits seem to have depressed investor expectations somewhat. But we'll round out the year in very good shape.

Here comes another crash… or not

I have to say, while researching this article, even I was stunned at how many 'market crash' predictions I came across. It's not a surprise that they're out there, but the sheer number was incredible.

Now, this piece has a bit of Harry Hindsight about it, of course. It's easy to look back and say -- with the benefit of that hindsight -- that those concerns were unfounded. What about the ones that come true? What about the years that end up down 14 per cent, not up?

Those years happen, of course. We end up with negative returns about one year in three. On average.

But good luck predicting it.

While doing that research, I also came across predictions of crashes that would wipe off 50 per cent and 80 per cent of the market's value… made in 2014, 2015 and 2016. Oh dear. For those playing at home, shareholders have enjoyed a 22 per cent return over the last three years, and 73 per cent over the last five.

Which, for those prognosticators, is a very inconvenient truth.

The ASX will have its bad years. For all we know, 2018 will be one of those periods. Or not. You won't find any predictions here: I have no idea what the short-term will bring. Nor does anyone else.

Yes, the financial year that is now drawing to an end was one of shocks and disappointments… as well as highs and successes. Which is precisely the point.

Investors feared Brexit. People fretted over commodity price falls. They feared -- then cheered -- President Trump's election. But very few feared what would become the GFC.

The end of the financial year also brings us closer to an anniversary: November 1, 2007 was the highest point the ASX hit before succumbing to the downward pull of the US sub-prime mortgage crisis that precipitated the falls of 2008 and 2009.

And when that high 'falls off' rolling ten-year share price charts, the lessons of the GFC will fade from investors' memories.

Foolish takeaway

If the 2017 financial year teaches us anything, it's that, as Mark Twain is often quoted to have said, "History may not repeat itself, but it does rhyme".

Which, if true, gives investors a very clear strategy. While markets do occasionally fall -- and sometimes by a lot -- the trajectory is a zigzagging upward motion. Or, put more simply, "invest anyway".

Happy New Year!

New report: The "blue chips" of tomorrow aren't the blue chips of yesterday. If you want to look forward rather than backward, we've released our three best ideas for 2017. Click here to learn more.

Scott Phillips is the Motley Fool's director of research. You can follow Scott on Twitter @TMFScottP. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).

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