Investment market update

An update from Brett Chatfield
Chief Investment Officer

Markets hit a rough patch but bounced back

Share markets experienced sharp falls in the first week of August, which appeared to be (in part) due to changing expectations around interest rates in the US and Japan. The good news is that broader investment markets have calmed somewhat, and mostly remain higher for the calendar year. Some volatility has persisted, however, with signs that markets remain sensitive.

US economy continues to grow modestly

While softening in certain US economic data is of some concern, other indicators suggest the US economy is continuing to hold up well. Easing inflation and a softening jobs market meant the US Federal Reserve cut rates by 50 basis points at its September meeting. With underlying inflation also easing in many advanced economies, other central banks have either already started or are considering cutting rates.

Meanwhile in the Australian economy…

Headline inflation rose in the June quarter, but – importantly – underlying inflation eased slightly. This brought some relief to markets, which had feared it might actually reaccelerate. Employment growth also remains robust, yet unemployment rose as more people are actively seeking work given the availability of jobs.

This should help support ongoing economic growth and company earnings, while higher unemployment should also help contain inflation. If these trends continue, the next interest rate move from the Reserve Bank of Australia is most likely to be down.

Investment market outlook

Overall, while data continues to show moderating inflation and positive growth across most economies, the recent market volatility demonstrates that the outlook remains uncertain and investment markets can be vulnerable to changes in data and expectations. Investment options that have exposure to shares and, therefore, share price movements can be unpredictable, especially in the short term.

Managing short term fluctuations

Super is a long-term investment, and our pre-mixed investment options are designed to withstand temporary shocks via diversification. Our aim is to ensure that if one asset class performs poorly, others will perform better. For example, asset classes such as Property and Infrastructure can help reduce the impact of short-term share market fluctuations. This is the power of diversification – helping to provide consistent overall performance.

Performance (%) to 31 August 2024