Investment market update

Broadcast news Dec 23

An update from Brett Chatfield, Chief Investment Officer

Brett 716x302

Financial markets have experienced weaker performance in recent months as inflation remains above central bank targets and the escalation of Middle East tensions has affected investor sentiment.

Both share and fixed interest markets have been weak, which is unusual as fixed interest can often provide some protection when share markets fall. The main reason for this weakness is a shift in investor views on inflation.

Whilst there has been a welcome easing in inflation in many economies, it remains well above central bank target levels and the pace of slowing is proving more gradual than central banks would like. So it looks like interest rates will need to remain at current levels for longer than previously anticipated in order to bring inflation under control. This has been viewed as bad news for share markets, as higher interest rates could hurt both growth and profits as we move into 2024.

A sharp rise in oil prices has also added inflationary risk back into the market outlook, and the recent escalation of Middle East tensions is contributing to global uncertainty and could potentially push oil prices even higher.

Having kept interest rates on hold since June in response to slowing consumer demand, the Reserve Bank of Australia (RBA) implemented another 0.25% interest rate rise in early November following disappointing inflation data. Encouragingly, the RBA’s statement considered “whether further tightening” is required, raising market expectations that this might be the final interest rate increase.

In this weak market environment, members may be concerned about their super balances. We understand that market ups and downs can be unsettling, but it is important to remember that these ups and downs are a normal part of investing. It is also important to remember that super is a long-term investment.

Our Growth (MySuper) investment option continues to deliver strong long-term performance, outperforming the median fund over 5, 10, and 20 years^ as shown in the chart below. Our investment options remain well diversified and designed to withstand periods of short-term market volatility.

* The return for the Growth (MySuper) investment option is based on the crediting rate, which is returns minus investment fees, taxes and until 31 January 2020, the percentage-based administration fee. Excludes fees and costs that are deducted directly from members’ accounts. Past performance is not a reliable indicator of future performance.

^ The median investment option return is taken from the SuperRatings FCRS SR50 Balanced (60-76) Index 31 October 2023. The default Growth (MySuper) investment option performance ranking was above the median return over 5, 10, and 20 years for the period ending 31 October 2023. SuperRatings is a ratings agency that collects information from super funds to enable performance comparisons – visit Past performance is not a reliable indicator of future performance.

Broadcast December 2023