2021-22 Marked by Market Volatility
18 August 2022
The 2021-22 financial year has seen negative returns in BUSSQ’s Balanced Growth option for the first year since the Global Financial Crisis of 2008-09. Heightened volatility since January 2022 means that any gains achieved in the first six months of the year have been lost. The volatility experienced this year highlights the importance of long term returns when looking at your super, which is a long term investment.
BUSSQ’s Balanced Growth option for Super and Income account returned -4.79% and -3.82% respectively for the 2021-22 financial year^. The 10 year return for the Balanced Growth option for super is 8.22% against the median fund return of 7.99%#, while the 20 year return for the Balanced Growth option for Income accounts is 7.93% against the median fund return of 7.87%#.
War in Ukraine and high inflation
Investment markets started the financial year in good shape. COVID-19 recovery was in full swing with the Australian share market showing modest gains of approximately 2.5% up until 31 December 2021. However, when Russia invaded Ukraine, market volatility increased rapidly as the war intensified and energy (gas and oil) shortages gripped Europe. This coupled with low interest rates around the world and supply chain problems caused inflation to soar. Central banks reacted by increasing interest rates quicker than many anticipated.
Locally, the Reserve Bank of Australia raised interest rates in May by 0.25%, the first rate rise since November 2010. This was followed up by 0.50% rises in both June and July+ with many experts expecting more rate rises for the rest of 20221. Rising interest rates have impacted valuations of many listed companies, especially large growth companies where profitability isn’t expected for many years.
The importance of BUSSQ’s long term returns
We’ve seen many market shocks in recent times including the Tech Bubble, Global Financial Crisis and COVID-19 pandemic. Even after these shocks, markets have recovered and gone on to exceed their previous highs. BUSSQ continues to provide strong long term returns for members.
We expect that shares will continue to be volatile and that inflation and the risk of a recession remains high. We will continue to monitor markets and look for opportunities to take advantage of market falls where possible.
To see our latest investment returns, visit our monthly investment performance page.
^After tax on investment earnings, where applicable, and indirect costs. +https://www.rba.gov.au/statistics/cash-rate/. 1https://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf, 12 July 2022. #Performance comparison sourced from SuperRatings SR50 Balanced (60-76) Survey at 30 June 2022. †3, 7, 10 year figures are average compound annual returns for the period preceding 30 June 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 information is general advice only and does not take into account or consider your personal objectives, financial situation or needs. Before acting, you should consider the appropriateness of the information to your needs or seek independent advice from a properly qualified professional. 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.