A volatile quarter to end the year
The December quarter was particularly turbulent for investment markets. This was driven largely by investor concerns over a trade war between the US and China, tensions between England and the EU about the looming Brexit and by central banks withdrawing liquidity around the world.
Share markets fell in the December quarter, and these negative returns were actually greater than the gains achieved in the September quarter. The US share market went down 13.5% for the quarter and the Australian market fell back by 9%.
In the other asset classes, however, global bond markets outperformed shares. Emerging market shares and debt both provided positive returns and Australian bond markets outperformed most other developed markets.
Diversification at work
While these events were somewhat challenging in the short term, all super funds who invest in a ‘balanced’ type investment strategy with a diversified mixture of growth and defensive assets expect to see these conditions from time to time.
Despite the short-term peaks and troughs, over longer periods the purpose of portfolio diversification is to help you to achieve good long term returns above inflation and healthy growth in your savings.
REI Super’s Balanced option was somewhat cushioned by our diverse mix of assets, but it nevertheless had a negative net return of -5.19% for the quarter, and was down around 3.44% for the year to 31 December. This was in line with other super funds’ balanced options.
In the longer term context, our Balanced option has provided members with an average net return of 8.5% per annum over the last seven years, and 7.8% per annum over 10 years.
Outlook
Most investors are remaining fairly cautious in the short term.
Some commentators think that market sentiment hinges significantly on the outcome of trade negotiations between the US and China. The success or otherwise of these talks will potentially feed into the real economies of both the US and China, depending on how they turn out.
At REI Super we continue to manage the situation by remaining well diversified, and by taking advantage of buying opportunities presented by well-valued investments.
Go to the investment performance section of our website to see investment returns of all of REI Super’s investment options.
Note: Past returns are no guarantee of future performance, and investment returns of less than one year should not be relied upon as any guide to future performance.