Q3 2023-24 investment market performance
Overview
- Equity markets continued strong momentum from Q4 2023 into Q1 2024, with US and Japanese markets posting very strong returns.
- Bond markets pulled back slightly during Q1 2024 due to subdued rate cut sentiment.
- Market expectations are for interest rate cuts in 2024 despite central banks pushing back on the timing.
- The “Magnificent 7” continues to dominate global market performance, heavily influenced by “Nvidia”.
Asset class recap for March quarter 2024
Global Shares: The MSCI World Ex-Australia NR Index returned 10.18% over the quarter in local currency terms.
Australian Shares: The S&P/ASX200 accumulation index returned +5.33% for Q1 2024.
Bonds: US 10-year bond yields rose over the quarter from 3.9% to 4.21%.
Global Property & Infrastructure: Domestic listed property had strong positive results alongside global equities, while global property fell flat over the quarter.
Currencies: Broadly speaking, the US dollar gained value versus most developed- and emerging-market currencies, providing a tailwind for unhedged exposures.
Changes to the Balanced Portfolio over the March quarter
- Adding US Utilities to maintain exposure to US Equities and mitigate valuation risk in comparison to growth sectors.
- Selling US Healthcare to capture profits and reallocating into Utilities.
- Used interest rate fluctuations to maintain a higher duration position helping to mitigate some equity valuation risk.
- Increased the allocation to international bonds, and more recently, Australian bonds, as yields neared 4.5%.
- Used volatility in the JPY to add to the existing position as the Yen appears to be cheap on long-term valuations.
- Reduced listed property to maintain desired positioning across growth assets as unlisted property were increased.
You can view all our latest returns on our Super Investment Performance page, or Pension Investment Performance page.
Market Update
Important Perspective
The year 2024 has started on a high note, with equity markets, particularly in the US and Japan, continuing their strong performance from 2023. Despite indications that central banks may delay rate cuts, market participants remain undeterred. The consensus is that the Reserve Bank of Australia (RBA) and other central banks in the developed world are likely to cut interest rates later this year or even in 2025.
Closer to home, the recent ASX reporting season was relatively calm. Many companies are focusing on cost control and cautious balance sheet management while seeking business growth opportunities. Equity returns varied across countries, with Japanese stocks performing strongly and UK equities making modest gains despite a recession announcement. Emerging markets showed mixed performance, with Chinese and Brazilian stocks facing losses while India gained.
Looking ahead, the market backdrop appears favourable, with improving sentiment and rising corporate earnings. However, central banks may not cut rates as quickly as many had hoped, and valuations are becoming expensive across many measures. Despite these challenges, we believe a cautiously optimistic stance is warranted. This approach balances risk and return drivers while selectively identifying pockets of opportunity.
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Need Advice?
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Future investment performance can vary from past performance, and you should not base your decision to invest in REI Super simply on past performance. Past earning rates are not an indicator of future earning rates. The investment returns of REI Super are not guaranteed, and the value of the investment may rise or fall.
The information contained in this article does not constitute financial product advice. REI Super does not give any warranty to the accuracy, completeness or currency of the information provided. Although REI Super makes every reasonable effort to maintain current and accurate information, you should be aware that there is still the possibility of inadvertent errors and technical inaccuracies. REI Superannuation Fund Pty Ltd ABN 68 056 044 770, AFSL 240569, RSE L0000314 Trustee of REI Super (ABN 76 641 658 449), SPIN REI0001AU, RSE R1000412. MySuper unique identifier 76641658449129
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