Market Update, November 2022

By Mark Rider, Chief Investment Officer, Brighter Super

29 November 2022

Investment markets continued to be impacted by inflation and rising interest rates over the last quarter (July to September 2022).

Inflation worldwide is reaching levels we haven’t seen since the 1980s. It is being fuelled by the war in Ukraine, the slow recovery of supply chains from COVID-19, and China’s strict zero-COVID policy.

Central banks are now in inflation-fighting mode. Many of them have raised interest rates to stabilise pricing and cool down their overheating economies. These monetary controls tend to slow the pace of economic growth and can impact asset values.

It’s a difficult time for all investors.

Falling global equities

Global equity markets performed strongly in July 2022 but weakened during the rest of the quarter, after the US Federal Reserve indicated that further interest rate increases may be coming.

US equities returned ‑4.7% for the quarter. Whilst the US economy is slowing, there is optimism around the rising employment figures and demand for labour.

Markets were also weaker in Europe, caused by inflation concerns and risks to economic growth. Economic data suggests a slowing economy, and the Purchasing Managers’ Index (PMI) indicates a slowdown in European manufacturing.

The Chinese economy has slowed down due to its property market slump and the consequences of a strict zero-COVID policy. Chinese equities gave a negative return of -21.6%, significantly underperforming the Emerging Market index.

Australian resilience

The Australian economy has remained reasonably resilient during the global volatility and continues to grow solidly. Australian equities were moderately positive for the quarter, unemployment was 3.5% which is almost the lowest in 50 years, and wages are rising again.

Over the year to September 2022, the Consumer Price Index (CPI) inflation rate was 7.3%, which is the highest in more than three decades. The Reserve Bank of Australia (RBA) has already increased interest rates seven times since May 2022 but expects inflation to decline in 2023.

The S&P/ASX 300 returned 0.5% over the quarter. Australia’s best-performing sector was energy, and the weakest sectors were utilities and real estate investment trusts (REIT).

The Australian Dollar (AUD) fell 6.5% against the US Dollar (USD) for the quarter, but strengthened against the Euro (EUR), GB Pound (GBP) and Japanese Yen (JPY) over the calendar year to date.

Bond volatility

The last quarter was very volatile for Fixed Interest assets. Both Australian and Overseas bond returns were negative for the quarter, as markets priced in expectations of higher policy rates from central banks.

Volatility in UK bond markets increased significantly during the recent political situation surrounding the UK Government’s unfunded tax cuts and subsequent change in leadership.

Ten-year bond yields have increased, and this has lifted longer-term return expectations for many of our diversified options.

Competitive returns

Brighter Super’s diversified portfolio is coping well with the current market volatility. Our longer-term performance remains ahead of our investment objectives¹.

In the shorter term, our returns continue to compare favourably with our industry peers.

The following quarterly returns were reported by independent analyst SuperRatings for the period ending 30 September 2022².

1. Accumulation options

• Brighter Super’s default MySuper option returned ‑0.18% for the quarter. This is above the industry median of ‑0.58% for MySuper options³.
• This competitive return puts our MySuper option in the top quartile of MySuper options for the quarter, ranked as the 13th best-performing option (out of 50).
• Four of our Accumulation options’ returns are in the top quartile for the quarter: Growth (0.34%, ranked 3rd), Balanced (0.1%, ranked 8th), Property (0.65%, ranked 5th) and Diversified Fixed Interest (‑0.72%, ranked 4th).

2. Pension options

• Brighter Super’s Balanced option (default for members aged under 75) returned ‑0.06% for the quarter. This is above the industry median of -0.83% for Balanced options.
• This competitive return puts our Balanced option in the top quartile of Balanced options for the quarter, ranked as the 6th best-performing option (out of 50).
• Brighter Super’s Conservative Balanced option (default for members aged 75 and over) returned ‑0.12% for the quarter. This is above the industry median of -0.28% for Conservative Balanced options.
• Two of our other Pension options’ returns are in the top quartile for the quarter: Growth (0.03%, ranked 10th) and Property (1.34%, ranked 3rd).

What can members do?

I encourage our members to stay informed about super and engaged in how it is invested. We have a range of information and resources on our website to help you.

We also hold regular member events, both online and in-person, where we share our latest insights and updates.

Before making decisions regarding your financial future, we recommend you seek advice. Brighter Super’s team of qualified professionals can give you the advice you need to make informed decisions about your super⁴.

We offer general advice over the phone, or you can arrange an appointment with one of our financial advisers for single issue or comprehensive personal advice. You can also book a 30-minute Super Health Check at no cost with one of our super specialists.

Call us on 1800 444 396 to discuss the type of appointment that would suit you best.