Investment update to 31 August 2024

30 September 2024

Brighter Super’s investment options achieved strong returns in August 2024. This was a solid achievement, given that global share markets experienced a large drop at the start of the month, followed by a rapid recovery. Inflation eased globally in August, and market optimism returned for eagerly anticipated interest rate cuts.

Returns for Brighter Super’s MySuper option and Ready-made Multi-manager options for periods ended 31 August 2024 are listed below¹.

High SuperRatings rankings

Brighter Super’s options achieved high rankings in SuperRatings’ August 2024 Fund Crediting Rate Survey, used to benchmark top-performing options across the Australian superannuation industry².

• Our Growth option (Accumulation and Pension) was again ranked as the number one, highest-performing option in its category for 5- and 7-years ended 31 August 2024.
• Our Balanced option (Accumulation and Pension) was ranked as second-highest performing option in its category for 5-years ended 31 August 2024, and the highest performing option in its category for 7-years ended 31 August 2024.
• Our MySuper returns were in the top quartile of SuperRatings’ SR50 MySuper Index for 3 years ended 31 August 2024, with 5.23% returns ranked 6th in the index – these were competitive returns during a period that included the 2020-23 COVID-19 pandemic.
• All our Ready-made Multi-manager options (Accumulation and Pension) achieved top quartile returns in their SuperRatings index or category for 1-year ended 31 August 2024 – this group of options does not include MySuper.
• Most of our Ready-made Multi-manager and Single asset class options (Accumulation and Pension) achieved top quartile returns for 5- and 7-year periods ended 31 August 2024.

Market summary

Despite significant volatility at the start of the month, Developed Market share returns were positive during August 2024. The MSCI World ex-Australia Index (Hedged) rose by 1.8% over the month.

At the beginning of August 2024, volatility briefly spiked to levels not seen since the COVID-19 pandemic. This was primarily linked to stress appearing in Japanese currency and equity markets, along with concerns of a weakening US economic outlook. By month’s end, however, most major Developed Market share market indices had recovered from this volatility and delivered marginally positive returns.

The US share market outperformed broader Developed Markets, with the S&P 500 rising 2.4% over the month. During August 2024, US Federal Reserve Chair Jerome Powell clarified that it would soon begin easing interest rates, in response to moderating inflation. Expectations for an easing in interest rates, along with other economic data that showed resilience in economic activity, were among the supports for the rebound in equity market performance.

(Note: since this analysis, the US Federal Reserve cut interest rates by 0.5% on 18 September 2024, its first cut since 2020. This was a larger-than-usual cut, bringing the US Fed funds rate down to a range of 4.75% to 5%. This will be reflected in next month’s investment update).

In Asia, the Bank of Japan’s rise in interest rates contributed to strengthening the Yen. Along with concerns about global economic growth, this resulted in the rapid unwind of some popular currency and equity trades. This saw Japanese equities fall by more than 12% in a single day, with volatility spreading across global markets in early August 2024. However, by month’s end, Japanese equities had recovered somewhat and returned -2.7% in August. Elsewhere in Asia, Chinese equities were moderately positive, returning 0.6%.

The MSCI Europe Index was stronger in August 2024, with positive returns across all major European geographies. Euro area inflation moderated further in August, falling to 2.2% (from 2.6% in July). However, there are some signs of potential for resilience in the Euro Area economic activity.

The Australian share market underperformed Developed Markets, returning 0.4% for the month. The Information Technology sector significantly outperformed all other sectors, returning 7.2% over August 2024. Conversely, the Energy sector materially underperformed, returning -6.2%. At its August meeting, the Reserve Bank of Australia left the cash rate unchanged at 4.35%. It stated that whilst momentum in domestic economic activity had been weak, inflation is proving persistent and returning inflation to target was taking longer than previously forecasted.

Bond yields were materially lower in early August 2024, amid concerns that weaker US employment data could lead to swifter rate cuts from the US Federal Reserve. By the end of the month, this had partially unwound, although the US 10-year government bond yield declined 0.14% to 3.92%. The Australian 10-year government bond yield declined 0.15% to 3.97%.

The Australian dollar was much stronger than the US Dollar, appreciating by 3.9%. It also rose against the Euro (1.6%), the Pound Sterling (1.5%) and the Japanese Yen (0.6%).  Conversely, the US Dollar was generally weaker against the currencies of most major trading partners.