February 2019 investment market update

19 February 2019

With all markets weak during the half-year period, it has been the worst December half since 2011, when Europe experienced its financial crisis. Share markets as well as credit markets suffered large falls. Fortunately, while Australian residential property was also weak, the commercial property markets that LGS invests in have held up.

 

Investors are concerned about a downturn in global economic growth, resulting in weakened activity in Europe over the calendar year, while Japan and China remain soft. The US economy remains strong but there are concerns about higher interest rates. The Australian outlook has been tarnished by falling house prices and the potential problems this may cause for consumer spending.

Commodities prices were generally weak, particularly oil which fell from $US67.50 at June to $US45 at year end. However iron ore, which is important to Australia as our largest export, managed to rise in the same period. The Australian dollar remained soft, falling from $0.78 against the US dollar to $0.71 over the year.

The Australian economy had a modest GDP growth of 0.3% in the September quarter and 2.8% for the year. Retail spending growth increased to 3.5% for the year to October but there are concerns about a slowdown.

Unemployment continues to improve, now down to 5.1%.

Official interest rates haven’t changed from 1.5% in Australia since August 2016. The Reserve Bank Governor noted that "the global economic expansion is continuing and unemployment rates in most advanced economies are low. There are, however, some signs of a slowdown in global trade". Inflation is under control and the RBA is prepared to leave interest rates where they are for now.

Share prices of Australian financial companies declined in the wake of the Hayne Financial Services Royal Commission. AMP lost about one third of its value in the half-year period. Energy stocks also fell heavily due to the oil price drop.

Looking abroad, the Japanese, European and US markets all declined by more than 10%. The US Nasdaq index fell sharply due to the poor performance of technology companies.

While global listed property fell by 6.4%, Australian direct property had a good gain of about 4%, mostly due to rental income.

The December half returns for the LGS blended strategies were mostly negative. However the Conservative option managed a small positive return, helped by a larger allocation to cash and bonds. The bigger losses from the High Growth and Balanced Growth strategies were due to having a higher allocation to the weak share markets.

To keep up to date with the performance of your super or retirement funds, you can view your monthly and annual performance history here.

Investment performance as at 31 December 2018

Account-Based Pension Plan

Investment option1 year (%)3 years (%)5 years (%)
Sustainable Australian Shares -7.63 1.08 5.01
High Growth -0.38 8.10 8.20
Balanced Growth 0.45 7.17 7.27
Balanced 1.47 6.32 6.39
Conservative 2.06 5.07 5.02
Cash 1.90 2.14 2.28

NB: The three and five year figures are rolling and reflect an annualised compound rate. Transition to Retirement members who want historical performance after 1 July 2017 should contact LGS Member Services. Investment returns are shown to two decimal places and are historical. Past performance is not a reliable indicator of future performance.

Accumulation Scheme

Investment option1 year (%)3 years (%)5 years (%)
Sustainable Australian Shares -6.64% 0.66 4.39
High Growth -0.23% 7.20 7.46
Balanced Growth 0.47% 6.35 6.58
Balanced 1.38% 5.51 5.67
Conservative 1.83% 4.34 4.38
Cash 1.63% 1.93 2.02

NB: The three and five year figures are rolling and reflect an annualised compound rate. Investment returns are shown to two decimal places and are historical. Past performance is not a reliable indicator of future performance.

Retirement Scheme

Investment option1 year (%)3 years (%)5 years (%)
High Growth -0.13 6.90 7.43
Growth 0.29 6.35 6.76
Balanced Growth 0.44 6.18 6.62
Balanced 1.45 5.52 5.83
Conservative 1.90 4.42 4.60
Cash 1.61 1.93 2.21

NB: All returns shown are for the Contributor Financed Benefit. The three and five year figures are rolling and reflect an annualised compound rate. Investment returns are shown to two decimal places and are historical. Past performance is not a reliable indicator of future performance.

The information on this website is of a general nature only and does not take into account your personal objectives, situation or needs. You should consider obtaining professional financial, taxation and or legal advice tailored to your personal circumstances prior to making any financial decision.