Investment Update 2018/19

with Funds SA and Super SA Chief Executives

 

December 2019 Overview

Key drivers of performance during the month included: 

  • Global equities posted strong positive returns and outperformed government bonds.
  • Global government bonds posted negative returns.
  • Domestic equities delivered negative returns underperforming global equities.
  • The Australian dollar appreciated against most major currencies.

This environment proved to be favourable for portfolios with relatively larger allocations to growth assets such as listed equities.

 

Key factors impacting financial market performance during the month included:

Equity Markets 

  • Equity market performance was positive, continuing from the previous month’s positive performance.
  • In the United States, progress was made with China towards a ‘Phase One’ trade deal, with both sides giving trade concessions.
  • The economic outlook improved as manufacturing and services indicators appeared to rebound from lows, market participants became increasingly optimistic which provided strong equity market returns for the US.
  • In the United Kingdom Brexit saw major developments with the Conservative Party securing a large Parliamentary majority in the general election. This result created a clearer path for a Brexit outcome, as the new Conservative government was able to push through increased government spending. Despite this, Prime Minister Boris Johnson introduced legislation which aims to prevent any further extensions, raising fresh concerns of a no-deal, hard Brexit. These developments provided strong equity returns for the UK.  
  •  In Australia, recent GDP figures showed consumer spending growth is now at its weakest level in a decade, and this caused Australian equities to post a negative return underperforming global equities.

 Debt Markets  

  • Global government bond markets produced negative returns over the month with long duration securities underperforming as the ‘Phase One’ trade deal improved risk sentiment.
  • Central banks remained on hold this month. The US Federal Reserve Chair Jerome Powell stated that the current policy is likely to remain appropriate.
  • Corporate bonds, high yield bonds and emerging market debt posted positive returns.

Currency

  • The Australian dollar appreciated due to rising commodity prices.