Investment update - December 2018 quarter

Key highlights

  • My GESB Super returned -4.90% for the quarter
  • My West State Super returned -5.12% for the quarter
  • RI Allocated Pension Balanced plan returned -4.97% for the quarter
  • Transition to Retirement Pension Balanced plan returned -4.32% for the quarter
  • Australian and Global Bonds were the best performing asset classes over the quarter
  • Ongoing United States (US)-China trade negotiations, US interest rate rises, and a cooling domestic housing market contributed to the negative Australian and International Shares returns

Performance of key market indices

Asset class index returns
  December 2018 quarter 1 year 3 years 5 years 10 years
Australian Shares
S&P/ASX 300 Accumulation Index
-8.41% -3.06% 6.65% 5.60% 8.91%
International Shares
MSCI All Country World Index - Local Currency
-12.51% -7.69% 6.43% 5.94% 10.00%
Global Listed Property
FTSE EPRA/NAREIT Developed Index - Local Currency
-5.29% -3.26% 3.46% - -
Australian Bonds
Bloomberg AusBond Composite Index
2.24% 4.54% 3.70% 4.67% 5.19%
Global Bonds
Bloomberg Barclays Global Aggregate Index - Hedged
1.66% 1.65% 3.51% 4.82% 6.35%
Cash
Bloomberg AusBond Bank Bill Index
0.48% 1.92% 1.91% 2.15% 3.07%

Source: Bloomberg. Returns shown are total returns.

Performance of investment options

Investment plan returns
December 2018 quarter 1 year 3 years 5 years 10 years
My GESB Super1 -4.78% -0.24% 5.05% 5.73% 7.91%
My West State Super2 -5.04% -0.28% 5.24% 5.89% 8.30%
Transition to Retirement Pension Balanced plan1,3 -4.26% -0.04% - - -
RI Allocated Pension Balanced plan1 -4.89% -0.40% 5.20% 5.81% 8.25%
RI Term Allocated Pension Balanced plan1 -4.94% -0.78% 4.75% 5.34% 7.86%

Returns greater than one year are annualised.
See the investment return history for all of our available plans.

Global share markets were down, led by the financial and energy sectors

During the December quarter, Australian Shares fell -8.41% compared to -12.51% for International Shares and -7.40% for Emerging Market Shares.

The financial and energy sectors led the decline, with falls in the price of oil due to rising supply from US shale producers. Iron ore resisted the trend, with the price surging 9.80% in December. The Australian dollar also lost ground during the quarter, falling 2.70% against the US dollar.

Australia’s economic growth was lower than expected, but jobs remain strong

The Australian economy expanded by only 0.30% in the September quarter, which was below market expectations. There are ongoing concerns about levels of household debt on house prices and its flow-on impact on spending.

The labour market remains strong and wages growth is showing signs of improvement. As at 31 December, markets continue to factor in a Reserve Bank of Australia (RBA) interest rate rise, although this isn’t expected until at least the first quarter of 2020. However, concern over the housing market has led to some commentators anticipating the next rate move will be down.

The United States Federal Reserve suggested fewer rate rises in 2019

Markets are becoming concerned that growth in the US is slowing. Tax cuts boosted growth and corporate earnings during 2018, but this stimulus will fade in 2019. With the Democrats winning the House of Representatives, the chances of further stimulus before the next election has significantly reduced.

The US Federal Reserve also changed its outlook slightly after its December meeting, suggesting a further two interest rate rises in 2019, instead of its previous estimate of three.

Wages rose in Europe despite reports of a weakening economy

European business surveys continued to weaken over the quarter, to levels consistent with a slowing economy. Contributing factors included a sharp decline in manufacturing export orders, especially from China, and domestic political factors such as the Italian budget confrontation with the European Union and widespread unrest in France. Despite this, the European Central Bank ended its quantitative easing program in December, noting general wage growth in the region.

Trade tensions between the United States and China continued to affect confidence

China is facing a slowdown in retail sales growth and industrial production, and ongoing difficulties from the trade dispute with the US. In response, Chinese authorities are stimulating their economy through a combination of monetary and fiscal measures.

1 Returns are reported net of fees and taxes.
2 Returns are reported net of fees.
3 Transition to Retirement Pension was incepted on 15 June 2017, so longer term returns are not available.

Performance information should be used as a guide only, is of a general nature, and does not constitute legal, taxation, or personal financial advice. The performance of your investment plan is not guaranteed and returns may move up or down depending on market conditions. Past performance should not be relied on as an indication of future performance. In providing this information we have not taken into account your objectives, financial situation or needs. Therefore, you should consider the appropriateness of the information in this document in relation to your objectives, financial situation or needs, before acting on it. We are not licensed to provide financial product advice. You should read this information in conjunction with other relevant disclosure documents we have prepared. You should seek advice specific to your personal circumstances from a qualified financial adviser before making any decision with respect to your investment plan.

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Page last updated 12 March 2019