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Investment Performance - Market overview as at 30 June 2021

 

Investment Performance
As at 30 June 2021

Investment markets performed very strongly in the June quarter, with Australian shares delivering a return of 8.3% for the quarter and 27.8% for the financial year. Overseas shares returned 9.3% for the quarter thanks to strong gains but also Australian dollar weakness, and 27.5% for the financial year. Global property markets also had a strong recovery over the past year returning 11.8% for the quarter and 24.5% for the one year. Fixed income markets provided a modest 1.5% return for the quarter, displaying their defensive characteristics.

Inflation fears decline (but remain)

Although the quarter saw long term bond yields drift lower (this is a positive for bond returns), they are still noticeably higher than they were at the end of 2020 due to ongoing concerns about inflation over the coming years. Annual inflation in the US topped 4% in April and increased to around 5% in May. Numbers like this haven’t been seen in more than a decade, and although it seems very likely that much of this will only be transitory, markets were concerned by these large numbers. However, the US Federal Reserve (the Fed) was able to calm investor nerves over the quarter stating that they don’t intend to increase interest rates until they see improved employment data, which is not expected until 2023. While the next rate hike may be many months away, the Fed will most likely reduce its ‘quantitative easing’ programs, such as offering cheap loans to banks, as an initial step to moving economies back to a pre-crisis position before increasing interest rates. Markets have arguably become quite used to quantitative easing as a feature of global markets, so its gradual withdrawal will likely test investor confidence from time to time.

Fundamentals remain solid

The US economy continues to improve with the stimulus packages from the Biden administration, including the American Rescue Plan. The jobs market has also improved, with the unemployment rate dropping below 6% over the quarter, with more than 1.6 million further jobs added. Manufacturing data also remains very strong and we would expect unemployment to drift lower in the coming months, albeit at a slower pace, as job openings become harder to fill.

In Australia, although the government has gradually removed the additional stimulus such as Jobkeeper, the data continues to point to a strong recovery with unemployment dropping to a new post-pandemic low of 5.1%. Nonetheless, our relatively slow vaccine rollout has resulted in further snap lockdowns such as that in Melbourne at the end of May/beginning of June and the Sydney lockdown which is into its fourth week at the time of writing.

The silver lining of Australia’s lagging vaccine rollout is the relative strength of other markets such as the UK, which bodes well for the tourism sector as travel restrictions ease. Migration has of course also been affected by the pandemic, with a net negative figure first being recorded in the June quarter of 2020 carrying through for the remainder of the year. This has had a major effect on Australia’s population growth rate, which reduced from 1.5% per annum to around 0.5% at the end of December. The economy has performed remarkably well given the effect of abrupt and persistent travel restrictions, but the normalisation of net migration is needed if economic momentum is to be maintained.

Outlook

Overall, the 2020/21 financial year has provided exceptionally strong returns for superannuation funds, which have more than recovered the losses at the start of the pandemic in March 2020. As the vaccine rollout continues to pick up pace in Australia it will boost economic activity and provide both consumers and businesses further confidence to spend and grow, which will be a positive for share markets. Whether further snap lockdowns can be avoided will be an important factor for the speed of the recovery, but we remain positive that markets will continue to provide good returns over the coming year as confidence picks up and a significant proportion of the population is vaccinated.

 

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.