ANZ Smart Choice Super Investor Update : Member Update Spring 2013
9 Investment insights Through much of the September quarter, financial markets were driven by an expectation the US would start to wind back or taper the ‘quantitative easing’ (money printing) program that has helped push up US share values. As speculation intensified in July and August, so did volatility on share and bond markets. But in mid-September, markets had an abrupt reality check. Contrary to expectations, the US Federal Reserve reaffirmed that ‘high stimulus and low interest rates’ will continue until unemployment picks up. In our view, given the current weak growth in the US economy, tapering is effectively off the table until some time in 2014. Importantly, the global recovery that began in 2010 remains on track even though the 2014 growth forecast fell by a fraction. The past quarter provided mixed signals. Broadly, the outlook for developed economies (besides Australia) improved, however for emerging economies, it was less strong. The most welcome news came from the most unlikely place: Europe. Strong manufacturing data suggests the troubled region is finally back on a path to growth. Elsewhere in Japan, the stimulus measures have boosted confidence, production and prices. The main concern affecting emerging markets is the GDP growth rate in China, which is now below 8%. One upside is that the Chinese government is focussed on ‘quality not quantity’ of growth and preventing internal market bubbles. Here in Australia, the end of the commodity boom is impacting the economy. A lower level of mining investment has seen job losses in regional Queensland and Western Australia. In August, the weaker outlook for growth and jobs saw the Reserve Bank of Australia cut interest rates to a record low of 2.5%. This prompted a sharp fall in the Australian dollar. On a positive note, surveys show the change of government in September has boosted business and consumer confidence. Australian shares Australian shares were the best performing asset class during the September quarter. While the broad share market index rose, some sectors performed better than others. For instance, companies that benefit from a lower Australian dollar such as retailers, manufacturers and small companies, performed well. Conversely, weaker growth signals from China saw mining and energy stocks underperform in the quarter.
Member Update Winter 2013
Member Update Summer 2014