Investment update

Share markets managed a robust rally in the June quarter after the Covid-19 outbreak caused share markets around the globe to fall significantly in March. Although the virus is still very much on investors’ minds, the recovery in global share markets has been very impressive and at a pace which few would have predicted. Australian shares gained 16.5% over the quarter but finished the financial year down 7.7% due to the very poor first quarter of 2020. International shares returned 5.9% over the quarter, with a stronger Australian dollar reducing some of the upside for Australian investors, but they still achieved a respectable 5.2% return over the year in unhedged Australian dollar terms. Bonds delivered a mildly positive return over the quarter, up 0.5% and despite these low returns they have maintained their diversification benefits. Cash returns remain very low and are expected to remain low for some time given the Reserve Bank of Australia rate of 0.25%.

Sentiment shifts as governments support markets

New data shedding further light on the severity of the economic slowdown across the globe began to be released over the quarter. Governments around the world were quick to respond, introducing initiatives to assist businesses and boost employment, which came into effect over April and May. Many central banks also reduced interest rates which provided additional support to the broader economy. These actions were key drivers for share markets rebounding strongly over the quarter, although we note markets are still below their February highs. The extreme pessimism that investors felt in March has subsided somewhat as investors have been able to better understand the medium to long term implications of Covid-19 and the expected impact on the economy. The recovery has been so rapid that the 34% decline in US shares between 19 February and 23 March was paired back to only a 9% decline as at 30 June.

The Australian Government’s economic support measures such as JobKeeper and JobSeeker payments have provided a significant boost to keep businesses open or lessen the impacts on those forced to close. However, even with these measures the unemployment rate in Australia has risen from 5% to 7.1%, although without the government policies this would likely have reached over 10%.

The employment market has been much worse in the US, with millions of Americans filing for unemployment benefits on a weekly basis. In fact, the level of people filing for unemployment benefits is greater than during the global financial crisis (GFC) of 2008. A key difference of the current crisis to the GFC is the much faster government response we’ve seen which has helped reduce the impact on the economy and businesses. Recent economic data from the US has shown somewhat of a recovery from the depths of March and April with May manufacturing data, retail sales and home sales all showing a strong rebound. Of course, fears of a ‘second wave’ in the US remain and there continues to be much uncertainty as to how long it will be before the workforce returns to ‘normal’. If the spread of Covid-19 continues throughout the US this will likely see a reversal of some of the opening up of businesses and renewed lockdowns which will impact business profits and the share market.

Australian economy performs well

The Westpac-Melbourne Institute Index of Consumer Sentiment saw its biggest ever monthly gain in May, and along with a jump in retail sales shows Australians are beginning to go back to the shops and increase their spending. Notwithstanding the recent outbreaks in Victoria and small spike in NSW, Australia has been performing exceptionally well as far as managing the rate of infection, and this will influence both the behaviour of households and the domestic tourism industry which will hopefully get back on its feet soon. Uncertainty over the stopping of the JobKeeper program in September as well as the containment of the virus will no doubt cause volatility in markets, but overall Australia remains in a much better position than most countries around the globe.

While we’ve done well in minimising damage to the economy, Australia is still very dependent on foreign trade. On this front Australia’s relationship with China will be monitored closely given the current US-China tensions as well as China’s influence over Hong Kong and Australia’s response.  Nonetheless, we remain cautiously optimistic that these issues will reach a compromise and the export of Australia’s resources will remain a key component of our economic well-being.

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.