<Super> Sunsuper Market Wrap, April 2017
[Brian standing in office]
Brian: Hi, I’m Brian Parker, and I’m the Chief Economist at Sunsuper.
<Super> Brian Parker, Chief Economist
<Super> How did Sunsuper perform over the March quarter?
Brian: Sunsuper’s Balanced option for Super-savings accounts produced a return of 2.7% for the March quarter, and a 13.1% return for the year ended March 2017. Longer-term returns remain very solid, with the Balanced option posting returns of 8.5%
p.a. over the last 3 years and 10% p.a. over the 5 years to the end of March.
<Super> How have world markets performed and what’s likely to happen next?
Brian: World share markets in the developed world enjoyed another strong quarter, although a rising Australian dollar detracted from unhedged international share returns. After underperforming in the aftermath of President Trump’s election, emerging
share markets rebounded over recent months.
Brian: The share market gains reflect ongoing optimism over prospects for the US and global economies. The Trump administration’s plans for significant tax cuts in the US have helped fuel this optimism.
Brian: However, we’re concerned that markets may have run ahead of themselves. Outside of the US, governments mostly remain either unwilling or unable to use their budgets to boost growth, so few are likely to follow the US lead.
Brian: Even with a Republican-dominated Congress, Trump is unlikely to be able to fully implement his economic platform. Fiscal policy may not be as expansionary as markets expect. And maybe it shouldn’t need to be. The US economy seems to be doing
well enough without the extra help. Certainly well enough to allow the US Federal Reserve to keep raising interest rates. Any extra stimulus might simply add to inflation and force interest rates to rise faster than current projected.
<Super> What about Australia’s performance?
Brian: Here in Australia, our share market has also been performing well. Australian shares were best performing of Sunsuper’s major publically traded asset classes over the year to March, with a return of just over 20%. Banks and mining shares
accounted for around two-thirds of that return.
Brian: While Australian shares performed strongly, the economy continues to grow at only a moderate pace. After posting only its fourth quarterly decline in 25 years during the September quarter, the Australian economy did recover in the December quarter.
Low interest rates and the depreciation of the exchange rate over the past couple of years are helping, and export volumes have been growing strongly. Headline and core inflation rates remain well below the Reserve Bank’s target range, and wages
growth has been very weak. This still provides the Reserve Bank with scope to ease policy if they feel it’s warranted. However, there is very little evidence that the current level of interest rates, the lowest in living memory, is holding the
<Super> What is Sunsuper doing?
Brian: While investment returns have been solid, financial markets still face a range of economic and political challenges over the coming months.
Brian: For some time now, Sunsuper has found few assets trading in public markets that could be described as genuinely cheap.
Brian: In this environment, the diversification benefits provided by alternative assets such as carefully selected hedge funds and our unlisted assets remain very attractive. They limit exposure to market volatility, and they allow us to build portfolios
for members that tend to exhibit smaller fluctuations in returns over the short term, without compromising long-term expected returns.
Brian: The rebound in emerging share prices over recent months is particularly pleasing. We continue to view emerging share markets as being one of the few publicly traded asset classes that can be described as genuinely cheap, especially when compared
to shares in Australia or the United States.
Brian: Sunsuper has investment options that are designed to meet the needs of a wide range of members. We offers members a range of 21 investment options to allow you to tailor your investments to your needs. 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.
Brian: As always, I’d encourage any of our members, especially those 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.
<Super> Sunsuper. 13 11 84.
<Disclaimer> Past performance is not a reliable indication of future performance.
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