Quarterly Investment Commentary

Super News

Leroy D’Souza, Senior Investments Analyst, takes the opportunity to review market activity and the Fund’s performance over Q4 2018.

Positive global economic outlook despite increased volatility in financial markets. Signs of an economic slowdown in some regions.

Economic environment

Global financial markets experienced increased volatility in October 2018 with a significant sell-off in equity markets following several years of strong performance leading up to September 2018. Tightening in US monetary policy, expectations of faster US wage growth and higher inflation all contributed to the equity market correction.

Global equity markets declined by up to 7% in the month of October. The size of the decline is not unusual in a historical context, especially following very strong equity market performance over recent years.

The economic environment remains supportive globally, with a large number of US companies reporting greater than expected earnings in the recent reporting season. However, the Eurozone and China have begun to show signs of slowing economic growth.

Emerging Market equities declined, particularly in less economically robust countries such as Turkey, Brazil and Argentina. The declines were partly driven by rising US interest rates, which reduced the relatively attractiveness of emerging market investments.

In Australia, the Reserve Bank of Australia kept interest rates on hold at 1.5%, and the unemployment rate decreased to 5%, a 6.5 year low.

Shares

Equity market returns fared poorly across the board in October 2018, with US and the UK experiencing declines of -6.8% (USD) and -4.9% (GBP) respectively. Japan experienced a more severe correction, returning -9.0% (JPY) during October.

Equity markets recovered in November, including US and Emerging Market equities, which generated 2.0% (USD) and 4.1% (USD) respectively over the period.

Australian equities posted negative returns in both months, with the S&P/ASX 300 declining -8.2% (AUD) over the two month period ending November 2018.

Fixed interest & cash

Global bond returns were soft, with the Barclays Global Aggregate (Hedged into AUD) Index returning 0.2% over the two month period ending November 2018. Australian cash returned 0.3% over the same two month period.


This investment commentary does not constitute advice. All investment figures quoted relate to before-tax performance of the relevant industry benchmark. Investment returns cannot be guaranteed as investment markets can be volatile. As a consequence, returns can be positive or negative. Past investment performance is not a reliable indicator of future performance.


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