Super funds have got off to a strong start to the financial year, according to superannuation research firm Chant West. The ‘median growth fund’, with 61-80% in growth assets, was up 2.7% for the month of July.
“July was an excellent month, but we need to remember we’re still in a low growth / higher volatility environment and this is likely to continue for some time,” said Chant West director, Warren Chant.
“Investment markets have had a good run in recent years, but most assets are now fully valued or close to it so it’s hard to find reliable sources of real return. That difficulty has only been compounded by the current political uncertainty, with the US election coming up in November and the consequences of ‘Brexit’ still to play out. So funds face a challenging period in terms meeting their long-term objectives, and members need to prepare for returns that are quite a bit lower than they’ve been used to.”
“In July, markets in the Eurozone were supported by a strong earnings season and reassuring economic data despite Britain’s decision to leave the European Union. While there remains much uncertainty in Britain, the political situation stabilised somewhat with Theresa May becoming the new Prime Minister.”
“In the US, we’ve seen mixed economic data but strong company earnings results. Given the current level of uncertainty, expectations for further US interest rate rises have been pushed back.”
“Closer to home, there remains concern over the pace of growth of the Chinese economy even though the most recent quarterly GDP data was better than expected. Meanwhile, back in Australia, we saw the RBA cut interest rates by 0.25% to a new all-time low of 1.5%, with further cuts this year remaining a distinct possibility.”
According to Chant West, Australian shares “surged” 6.4% in July. International shares increased 4.1% in hedged terms, but with the Australian dollar rising this was 2% in unhedged terms. Australian listed property rose 5.4%, with global REITs up 5.1%.
As is often said: past performance is not an indicator of future performance.