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Investment Performance - Market overview to 30 September 2021

 

Investment Performance
Market overview as at 30 September 2021

After strong gains in July and August, share markets fell in September, but the full quarter returns remained positive. International share markets returned 4.0% (unhedged in Australian dollars), the Australian share market was up 1.7% and global listed property markets were up 3.6% over the quarter. Given the low level of bond yields, returns from bond markets continue to be low at 0.3% for the quarter and with interest rates still at historical lows, returns from cash also remain low at 0.01% for the quarter.

US debt ceiling and inflation worries

Whilst overall the quarter remained fairly optimistic, concerns began to rise towards the end of September regarding the level of US government spending. The US Treasury has approached its mandated debt limit, but in October the government agreed to push the debate out to December to allow more time to agree on the new debt ceiling. Neither the Democrats nor Republicans want to see the country default, so we believe that an orderly increase in the debt ceiling will be forthcoming eventually.

Aside from concerns on US government debt levels, inflation has also been rising leading to some economists believing that increasing government debt levels may lead to higher inflation over the medium to long term. US inflation has remained elevated and inflation around the globe has picked up as economies re-open and retail spending increases, but it is expected this activity will fall back to ‘normal’ levels by the end of the year as people get used to living with the Covid-19 virus.

Recent actions by the European Central Bank and talk from the US Central Bank of reducing their monetary support has also had a negative impact on bond markets. President Biden is pushing ahead with further stimulus packages which generally supports share markets in the short to medium term.

Given the very low returns from cash and bonds we expect shares to remain a solid investment over the coming year. The US labour market is particularly strong with over one million jobs added in August alone and this should continue to boost the US and hence the global economic recovery.

Evergrande Group default makes waves

Another concern recently has been the news that Chinese real estate developer Evergrande Group may collapse due to high debt levels. Chinese shares have underperformed in recent months due to a spate of new regulation, however this development has led to concerns about the flow on effects that a default by a large corporate such as Evergrande may have on the real estate sector and the wider economy. The potential range of outcomes is broad, but we believe the Chinese government will look for an orderly recapitalisation of Evergrande and avoid a significant fall in markets in China and across the globe, but there may be further volatility in the near term.

Australia poised for a bounce

The Australian economy contracted sharply over the September quarter due to the lockdowns in major cities. However, with the continued increase in vaccination rates and the re-opening of states and territories, we should see a surge in spending, such as travel and eating out at restaurants. This increased activity will be good for the economy, particularly the jobs market which should rebound strongly. Although the unemployment rate fell to 4.6% at the end of September, the number of people wanting to work more hours has risen noticeably. These statistics indicate that the Australian economy can rebound quickly out of the recent lockdowns with plenty of people available to work more hours and retail businesses are expected to offer large discounts to attract customers.

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.