2021-22 investment market update
18 July 2022
June was another month of large moves in financial markets as investors wrestle with the impact of two competing factors:
- ongoing and rising inflation, both from supply shocks such as the Ukraine war as well as excess spending in the economy; and
- the potential for slower economic growth to impact corporate profits later this year.
Central banks remain determined to reduce inflation by increasing official cash rates, and this is impacting on consumer sentiment, particularly for those who have a mortgage on their home. Economists are predicting that cash rates could reach 3.4% by the middle of 2023, compared to a current rate of 1.35% - this could see variable mortgage rates between 5% and 6% in a year’s time¹.
The changing economic situation is also having a large impact on financial markets. During June we saw:
- the S&P 500 index fall 12% at one point during June and finish the month down 8.3%
- the Australian share market fall 12% at one point before finishing the month down 9.0%
- oil prices were also on a wild ride: up 6% then down 12%, before finishing down about 4%
- Australian 10 year bond yields increased by 0.9%, before finishing the month up 0.5%
- the Australian Dollar finished the month down about 4%, as the US Dollar continued to strengthen.
Iron ore and copper prices have also been under pressure, despite the first signs that China may ease its “COVID zero” lockdown policy.
This market volatility, that has been occurring globally since early 2022, has led to investment markets finishing the 2021-22 financial year down from where they started in July 2021 and this has been felt by all super funds.
For the 2021-22 financial year our Balanced Growth Super option returned -4.79% and our Balanced Growth Income account option returned -3.82%.
It’s hard to see the impact these occasional negative returns have on your retirement savings, but it is important to look at long term returns because your super is a long-term investment, even for those in retirement, who might have another 10 to 30 years of returns to look forward to.
Our medium and long-term returns remain strong with our Balanced Growth Super option returning 5.48% p.a. over 5 years and 8.22% p.a. over 10 years to 30 June 2022.
Looking ahead experts anticipate we will continue to experience a period of market volatility as central banks work to lower inflation and the war in Ukraine continues.
Markets do however eventually recover as they have done following previous periods of volatility, and the way to make sure you can capture that likely recovery in prices is to remain invested in a diversified strategy.
To see our latest investment returns, visit our monthly investment performance page.
1. https://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf, 12 July 2022. Past performance is not a reliable indicator of future performance. Investment returns are net of investment fees and costs, and taxes, and the percentage-based administration fee. This email provides general information only and does not take into account your personal financial situation or needs. Before acting, you should review the Product Disclosure Statement (PDS) to ensure you have all the information about the relevant BUSSQ product and how it works and consider the appropriateness of the information to your needs or obtain financial advice tailored for your personal circumstances. You can download BUSSQ's PDSs and Target Market Determinations or call us to request a copy. Prepared by BUSS(Queensland) Pty Ltd ABN 15 065 081 281, AFSL 237860, Trustee of Building Unions Superannuation Scheme (Queensland) (BUSSQ) ABN 85 571 332 201.