BUSSQ’s growth oriented investment options were strong towards the end of 2023 and while share markets fell almost 10% between August and October, they rallied sharply during November and December as investors were optimistic that the US Federal Reserve would begin to cut interest rates in 2024, given inflation was improving and it was expected that the US would avoid a recession.
A stronger Australian dollar negatively impacted global returns when measured in Australian dollars and while interest rates appear to have peaked in Australia, it is unlikely the RBA will reduce interest rates until inflation falls within their target range of 2-3% (currently 3.8% based on 30 June 2024 data#).
The start of 2024 saw BUSSQ’s investment team anticipating inflation and interest rates remaining above central bank targets, which typically has a negative impact on share markets and growth orientated stocks. To position the fund to take advantage of this environment, the investment team:
- deployed a defensive investment strategy reducing exposure to shares and growth orientated stocks, which usually suffer when inflation and interest rates are high; and
- maintained investment in high quality, blue chip stocks recognised for consistent performance.
However, investment markets haven’t behaved in line with historical patterns. A sharp rise in January on the expectation rate cuts would occur saw investor confidence grow. Then despite the realisation that inflation and interest rates looked likely to remain higher for longer (which can be a trigger for markets to fall), investor enthusiasm for artificial intelligence companies further buoyed the market, in particular growth stocks, at the expense of many high quality stocks.
This volatility resulted in the Balanced Growth Super option returning 6.71%^ and the Balanced Growth Income account option delivering 7.38%^ for the 2023-24 financial year. Click to see our full 2023-2024 super investment returns and Income account investment returns, or for our latest returns see our investment performance page.
Looking ahead
Many economists predict a recession locally and in major global markets within the next year. BUSSQ is positioned well for this potential scenario with our defensive strategy focused on high quality shares that traditionally perform well during downturns.
This scenario started to play out in August 2024, as a shift in investor sentiment toward the US economy turned as a weaker than expected US employment report, alongside a further drop in the ISM Manufacturing Index undermined the prevailing optimism. At the same time, the enthusiasm over artificial intelligence that has driven tech stocks is being reassessed, as second quarter earnings (and in some cases, forward guidance) from US mega caps fell short of lofty expectations.
In times of volatility it is important to remember that superannuation is a long term investment and BUSSQ has a history of strong, long term returns†. BUSSQ’s goal is always to invest strategically over the long term. This November BUSSQ celebrates 40 years of helping you, our members, grow your super for your best possible retirement.
