Investment Performance

Market overview as at 30 September 2020

Following on from a very strong second quarter, share market performance was more varied over the September quarter as the effects of Covid-19 and government activity differed across the globe. The US share market has gone from strength to strength since the March sell-off, with the S&P 500 Index briefly hitting a new all-time high in September before receding to finish 8.9% higher for the quarter. Highlighting the benefits of diversification, European shares weakened over the quarter as concerns regarding Covid-19 case numbers in the region dominated. As in overseas markets tech stocks rallied in Australia, but this wasn’t enough to offset weakness, particularly in the energy sector, and the S&P/ASX 200 finished 0.4% lower. Bonds on the other hand performed solidly, with the Australian bond index rising by 1.0% for the quarter.

Covid-19 second wave

The rate of spread of Covid-19 remains the largest driver of share markets from week to week with the experience in the US and Europe as well as emerging markets such as India, varied over the quarter. The US experienced a rapidly growing second wave which peaked in July, whereas second waves occurred later in some other key markets, notably the UK which is still coming to grips with the high level of infections. Despite the recent outbreak in Victoria, Australia is generally doing well and much better than other developed countries in containing the virus; there is hope that easing in restrictions will continue over the remainder of the year to get back to some form of normality, particularly for small businesses that have been struggling.

The US share market has been supported by a reasonably robust economic recovery, with markets also being positively influenced by the hope of a vaccine in the coming months, although advice from medical experts still place this as a low probability. Consumer sentiment has continued to improve (but is still well below its February high) and the manufacturing sector has continued to expand after the sharp contraction caused by various shutdowns earlier in the year. New claims for unemployment insurance have dropped fairly consistently, and there is evidence of strong growth in the number of job openings.

Clearly the US economy is not nearly as strong as it was at the beginning of the year, but momentum seems to be building in terms of a slow recovery from the lockdowns. The hope of a large stimulus package has also sent markets higher, and although President Trump has injected some stimulus using executive powers, a far more impactful package will need the approval of congress. However, with the rapidly approaching presidential election on 3 November, co-operation between the Republican and Democrat parties may be too much to ask for and doubt remains that they can agree on the terms of the stimulus package.

Overall, the US share market has been largely driven by the key tech companies like Facebook, Google and Amazon as well as Tesla. These businesses have done well as people have moved to more online shopping and working from home.

Australia enters a recession

One of the more significant, but well anticipated developments over the quarter was the news that Australia officially entered its first recession since 1991. Unfortunately, the economy shrank by more than economists had expected in the June quarter, with Gross Domestic Product, or GDP (a measure of the country’s total output) falling by 7% after a much milder 0.3% decline in the first quarter. The official definition of a recession requires two quarters in a row of negative GDP. The economy contracted at a much faster pace than it did three decades ago, and in fact June was Australia’s worst quarter since data collection began in 1959.

There remain some important risks in the near term, the three largest being the ongoing impact of Covid-19, the US election and the potential collapse of Brexit negotiations. Given these risks we are taking a cautious approach to investing, but over a 12-18 month time horizon we remain optimistic regarding the economy’s recovery and the positive impact on share markets. For Australia, the relationship with our key trading partner China remains important for the continued growth of the economy as we climb back from recession. If Australia can continue to contain Covid-19 and reopen businesses this should put us in good stead compared to the rest of the world.

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.

Note: The 1, 3 and 5 year figures are rolling, reflect an annualised compound rate and are after tax and fees. Past performance should not be regarded as an indication of future performance.