Caresuper investment update - December quarter 2020

INVESTMENT MARKETS – A SNAPSHOT

Investment markets have continued to rise in the December quarter, helping to deliver strong returns for members. By contrast, the Cash investment option yielded minimal returns for the quarter, reflecting Australia’s near-zero official cash rate.

WRAP OF PERFORMANCE

CareSuper’s Managed options have seen solid returns in the second quarter of the 2020/21 financial year with our Balanced (MySuper) option delivering 6.3% for the quarter, and 4.2% for the year to 31 December 2020. Returns for our pension members were slightly higher as pension members don’t pay tax on investment earnings.

Overseas, Australian and private equity shares were the key drivers of performance over this quarter. Steady returns from our unlisted property and infrastructure assets also added to gains. With interest rates around the developed world sitting at virtually zero or negative, fixed interest and cash returns yielded minimal returns for the quarter.

Our longer-term returns remained strong with the Balanced (MySuper) option posting returns of 8.5% per annum, over the last 10 years to the end of December. This is well ahead of the industry median return of 7.5% per annum.*

You can see the returns for all of our investment options over various time periods set out in the performance table.

WHAT HAPPENED IN MARKETS

The December quarter saw very strong returns for global share markets. The US (S&P500) was up around 10%, and emerging markets were slightly stronger with returns just over 11%. This performance was largely led by a strong pick-up in growth in China. 

The Australian share market (ASX 300 index) also leapt in value by over 13% in the December quarter, with the major banks and energy sectors rebounding strongly after a weak September quarter.  

These strong returns in part, can be attributed to investment markets being supported by governments and central banks around the world who have acted swiftly and decisively to stimulate economic activity. The news of successful COVID-19 vaccine trials by several companies provided another boost to markets towards the end of 2020. This news even helped to improve the returns for the transport, infrastructure and property sectors that were among the worst affected by the 2020 shutdowns.  

Against that promising backdrop, a last minute ‘Brexit’ trade deal between the UK and European Union, and the US Congress voting to release a new stimulus program following the election, also helped to further uplift the world’s share markets.

By contrast with share markets, the international and Australian bond markets yielded flat returns for the quarter. The Reserve Bank of Australia (RBA) cut the official cash interest rate from 0.25% to 0.10% in November to support  Australia’s economic recovery from the pandemic.

The Australian dollar continued to climb, reaching over 77 US cents over the December quarter, which was reflective of the strong performance of both overseas and Australian share markets. 

LOOKING AHEAD

Recent economic data suggests that we are on the road to a global recovery. With vaccine distribution now underway, there is a realistic prospect that economic activity can begin to return to normal. 

And even as the recovery evolves, governments and central banks are expected to stay committed to supporting economic activity. Interest rates are likely to stay low for some time and the continued provision of fiscal stimulus appears to be enough for markets to push higher for now, despite share valuations looking high.

But plenty of risks still lie ahead. The main risks to watch include the rapid spread of a more contagious virus strain which has started to emerge around the world, the policy uncertainty with the new Biden administration in the US, and the ongoing tensions between China and the major western economies including Australia. 

We’re closely monitoring markets, economies and the actions of governments, to ensure that we’re able to respond in a way that helps to maximise your savings and manage risk.

* SuperRatings Fund Crediting Rate survey SR50 Balanced (60-76) Index – December 2020.

CareSuper’s performance figures shown are before tax but net of investment fees, and have been rounded to two decimal places. Past performance is not a reliable indicator of future performance and you should consider other 
factors before choosing a fund or changing your investments.