Australian market ends FY24 on a high; which sectors stood out? Author: Proactive Investors

After rising almost 8% in the 2023-24 financial year, it is now hovering near record highs. And when dividends are included, the Australian stock index is up more than 12%.

However, when analysing individual sectors, not all of them achieved good results.

What went well?

Financial

The main driver of these gains was the financial sector.

National Australia Bank (NAB) shares are up 38% over the past year, reaching their highest level since December 2007, just before the global financial crisis.

During the same period, the Commonwealth Bank share price rose by 27% to a new record high of A$128.68 at the end of June.

Technology

The technology sector was the most profitable sector on the ASX, up an impressive 30% year-on-year.

Leading the move were tech stocks such as Life360, up 120%, Altium up 87%, Megaport up 66% and Zip (ASX:) Co up 252%.

Analysts attribute the increase to positive sentiment in the US technology sector, which has had a significant impact on the Australian market.

On Wall Street, the Nasdaq is up 32% over the past year, thanks largely to advances in artificial intelligence (AI). AI chipmaker Nvidia played a key role, soaring more than 200% and briefly becoming the world’s most valuable company, with a market value of $4.67 billion.

Consumer Discretionary Goods

The consumer discretionary sector also performed surprisingly well – despite the per capita recession and lower public spending – recording a significant increase of 23% over the past year.

Standout companies in the sector included jewellery chain Lovisa (74%), Premier Investments (56%) – owner of Peter Alexander, Smiggle, Just Jeans and other retail brands – and JB Hi-Fi (43%).

What did not perform well?

Basic necessities

Meanwhile, consumer staples was the worst performing sector on the ASX this year, falling 6%.

The sector was dragged down by Coles (-8%) and Woolworths (-15%) in particular. This was mainly due to cost of living pressures, pricing pressures and political pressure on these companies.

Lithium

Lithium companies, whose shares have fallen 70%, are among the worst-performing on the ASX – all are now unprofitable.

Some of the most notable companies include Core Lithium (-89%), Lake Resources (-86%), Piedmont Lithium (NASDAQ:) (-83%), Global Lithium Resources (-82%), Galan Lithium (-81%), Sayona Mining (-78%) and Liontown Resources (ASX:) (-68%).

Looking to the future

Many are expecting the ASX to hit new highs this year on hopes of an RBA rate cut, but analysts are warning there are significant risks ahead.

China, Australia’s biggest customer, is a major concern amid fears of an economic slowdown. The Chinese economy has been hit by weak consumer sentiment and a prolonged housing market slump.

Another risk is the ongoing pressure on the cost of living and what that means for the Australian consumer, given that consumer spending accounts for about 60% of the country’s economic growth. Spending cuts could raise unemployment levels, while immigration cuts could result in weaker growth.