<Super>Sunsuper Market Wrap, April 2018
Hi, I’m Brian Parker, and I’m the Chief Economist at Sunsuper.
<super>How did Sunsuper perform over the March quarter?
The Sunsuper Balanced option for Super savings accounts lost 0.1% for the quarter, but still produced a return of 9.0% for the year to March 2018. Longer-term returns remain pretty solid, with the Balanced option posting returns of 7.2 per cent p.a. over the last three years and 9.7 per cent p.a. over the five years to the end of March.
<super> How have share markets performed?
World share markets had a difficult start to 2018. All the major developed share markets produced negative returns over the March quarter. Initially, markets were unsettled by signs of rising US inflation. However more recently, it’s been about trade tensions between the US and its key trading partners.
Emerging share markets once again outperformed those in the developed world, despite those trade tensions.
The Australian dollar was weaker over the quarter against a range of currencies, enhancing the returns from unhedged international shares.
Australian shares underperformed developed markets over the quarter as the start of the Financial Services Royal Commission weighed very heavily on bank share prices.
<super> What about fixed income markets?
Australian fixed income outperformed both cash and global fixed income over the quarter, and Sovereign bonds outperformed corporate and other non-government securities.
Australian yields fell, with 10-year Australian bond yields trading below US yields for the first time since June 2000. US bond yields rose sharply over the quarter, amid some signs of rising US inflation and a further tightening in monetary policy.
<How has the global economy fared?>
In more recent months, some weaker than expected economic data, disappointing results from key business surveys and lower share prices have raised concerns that global growth is likely to slow significantly from here. At this stage though we believe the combination of accommodative monetary policy, a generally healthy financial system, and easier fiscal policy (especially in the US) make a major downturn unlikely.
<super> How is the Australian economy performing?
Australia’s economy grew by just 0.4% in the December quarter and 2.4% over the year to December. But other indicators of Australia’s economic performance paint a brighter picture: business investment has begun to improve; and full-time jobs are growing at their fastest annual rate since 2007. However, wage and price inflation remain subdued. We still expect a gradual acceleration in overall economic growth and inflation, but neither is likely to be soon enough or fast enough to force the RBA to raise interest rates any time soon.
<super> What is Sunsuper doing?
In traditional asset classes, the strong performance of emerging markets has reduced their relative attractiveness and we have reduced our exposure to those markets. Our fixed income portfolios still favour higher quality corporate bonds over sovereign bonds, although over the past year we have increased our exposure to sovereign bonds as yields have become somewhat more attractive.
We view the diversification benefits provided by unlisted assets, as well as carefully selected hedge funds, as very attractive. They allow us to construct portfolios that exhibit smaller fluctuations in returns over the short term, especially during the kind of share market volatility that we’ve seen in recent weeks, without compromising long-term expected returns.
While prospective returns in unlisted and alternative assets have come down, we continue to find opportunities in these asset classes.
<super> What does it mean for your super?
Sunsuper has 20 investment options that are designed to meet the needs of a wide range of members.
And remember, if you’re invested in Sunsuper’s default option, the Lifecycle Strategy, as you approach and then enter retirement, we automatically and gradually reduce your exposure to growth assets such as shares. We do that to reduce the impact of market downturns on your investment.
As always, I’d encourage any of our members, if you’re concerned by the recent falls we’ve seen in world share prices, and especially if you’re approaching retirement, to speak to one of our financial advisers to find out if the Sunsuper investment option you have is the right one for you. Please give Sunsuper a call on 13 11 84.
<Dissolve to disclaimer>
Past performance is not a reliable indication of future performance.
Prepared and issued by Sunsuper Pty Ltd ABN 88 010 720 840, AFSL No. 228975, the Trustee and issuer of the Sunsuper Superannuation Fund ABN 98 503 137 921, USI 98 503 137 921 001.
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