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Investment Performance

Market overview as at 31 March 2021

2021 has started with another solid quarter for share markets. The Australian market returned 4.2% and international markets increased by 6.3% in unhedged terms. European share markets saw some of the strongest gains, increasing by more than 10%. Continued success with the various Covid-19 vaccine rollout programs across the globe drove markets higher, while government stimulus in the US was also a major contributor. Bond markets disappointed when investors became concerned that this stimulus could mean higher medium to long term inflation than had previously been expected, but markets appeared to settle down towards the end of the quarter.

Vaccines boost confidence

The successful rollout of the Covid-19 vaccine in the US and UK have improved investor confidence and was a major factor in driving share markets forward over the quarter. Roughly half the population in each country has received at least one dose of the vaccine and despite some concerns being raised over potential side effects such as blood clotting, the rollout continues at a good pace in these countries. This will in turn enable the re-opening of economies that have been forced into lockdown over the start of 2021 and consequently provide more jobs and increased spending, which are positive for share markets.

Europe remains well behind the UK in its rollout of the vaccine and has been more cautious in approving vaccines for the general population. This has not led to any impact on European share markets though as they have performed strongly over the quarter, making up some of the underperformance from 2020.

US stimulus on the way

A key driver of markets over the quarter was President Biden’s US$1.9 trillion recovery package, along with mention of more government spending on infrastructure in the years ahead. Total spending under the American Rescue Plan is approximately 9% of annual gross domestic product (GDP), a measure of yearly economic output, so the effect on manufacturing and services will be quite significant. The plan is much larger than the package agreed prior to Biden’s inauguration and should add significantly to growth in 2021. One concern though is the impact of such large government spending on future inflation, particularly given the resilience demonstrated not only by the US economy but major trading partners such as China, even before the announcement of the package.

The US Central Bank targets inflation at 2% p.a. and the market is currently expecting inflation to reach this level over the next year, with a short-term spike in the June quarter due to the low starting point from June 2020. If inflation was to stay elevated past June this could see bond investments perform poorly as yields rise, causing capital losses. However, for now the Central Bank has been playing down inflation concerns, stating that any pick-up in inflation will be transitory and there are no plans to increase interest rates before 2023.

Chinese share markets wobble

Policy and regulation worked against the Chinese share market in the latter part of the quarter, with shares falling by more than 3% due to concern over the withdrawal of government stimulus and a general tightening of lending by the banks. Chinese internet giant Tencent fell by close to 8% in March alone, but for context remained more than 60% higher compared to the end of 2019. Emerging market shares tend to be more volatile than developed markets, but the recent pullback in share prices makes their value more attractive looking forward. China’s expected long-term strong growth also provides a tailwind for this market.

Australian economy performing well

The Australian economy has continued to perform relatively well thanks to our low Covid-19 numbers and lockdowns being relaxed. Unemployment dropped to 5.8% in February, a big improvement from the 7.5% jobless rate we saw less than a year ago, and not significantly higher than the 5.2% rate recorded just before the economy began to feel the effects of the virus. Job advertisements have continued to rise and ANZ data shows that there are now more positions advertised than there were at the end of 2019. This provides encouragement for the workforce in 2021.

 

EISS Super

Performance History

1 mth (%) 3 mth (%) FYTD ** 1 yr % (pa) 3 yr % (pa) 5 yr % (pa) 7 yr % (pa) 10 yr % (pa)
*Please note prior to 18 November 2019 the EISS Super default MySuper investment option was the Conservative Balanced option
**FYTD means Financial Year to Date starting 1 July.

EISS Pension

Performance History

1 mth (%) 3 mth (%) FYTD * 1 yr % (pa) 3 yr % (pa) 5 yr % (pa) 7 yr % (pa) 10 yr % (pa)
*FYTD means Financial Year to Date starting 1 July.

Retirement Scheme

Performance History

1 mth (%) 3 mth (%) FYTD * 1 yr % (pa) 3 yr % (pa) 5 yr % (pa) 7 yr % (pa) 10 yr % (pa)
*FYTD means Financial Year to Date starting 1 July.