Investment update – June quarter 2024

Here’s a look at what’s been happening in investment markets recently and what it means for your superannuation.

Interest rates: will they, or won’t they?

Expectations on when central banks will reduce interest rates have changed. Inflation remains stubborn and above the Central Bank range. This saw the US Federal Reserve and the Reserve Bank of Australia (RBA) leave interest rates unchanged. Influencing these decisions were the progress being made on pulling back the inflation rate, the labour market, energy costs, consumer spending, and economic growth.

There is no doubt that the high cost of living has impacted people because of sharp interest rate increases, however, consumers have displayed resilience. In the past, there were expectations of a global recession by this point in the cycle. However, most economies have avoided this because of a combination of persistent spending behaviour, robust labour markets and technology optimism.

The central banks’ approach remains one of caution, with the financial markets continuing to wind back expectations of rate cuts. In the US, The Federal Reserve indicated the possibility of one rate cut before the end of 2024, while the financial markets are expecting two. Within Australia there has even been talk of one interest rate rise before the end of 2024 if inflation does not continue to fall.

Overall, within most economies rate cuts are not expected until inflation returns to the desired range by the second half of 2025, even though the European and Canadian central banks have already moved and cut rates in the June quarter.

Other financial markets

The economic momentum from the March 2024 quarter continued into the June 2024 quarter, with another positive period for share markets.

The positive performance was driven by technology companies, especially those exposed to artificial intelligence. Driven by the ‘big four’ US tech companies and Nvidia, this sector outperformed all the others and masked the lagging performance of the energy, materials, and industrial sectors. This does question future economic growth.

Property assets remained robust although sensitive to interest rates, due to higher borrowing costs and investors requiring a higher rate of return.

The Australian dollar increased against most currencies in the June quarter as the RBA considered whether to hike interest rates again, amid a global trend of central banks contemplating or implementing rate cuts.

How your investments are performing

Driving the additional value in the returns on your funds, were the following assets, which performed well against their relative benchmark:

• Australian private equity
• Australian infrastructure
• International infrastructure
• Property sector; and
• Cash.

Looking ahead, will interest rates fall?

The big question that remains is when central banks will cut interest rates. As we are reminded by the RBA, they are walking ‘a narrow path’ as their decisions need to tame inflation without driving the economy into recession.

In Australia, we also have a slowing economy which is and will be impacted by China’s falling economic performance, especially in their real estate sector. And young Australians are having a significantly more difficult time meeting living costs than retirees.

Beside economic data, there is always the uncertainty of political stability. The 2024 year has and will see many government elections. There were snap elections in the UK, and France with the latter generating unexpected results. The election in India saw Modi’s government party lose its majority status. And we still have the US election unravelling as the voting day approaches.

And then there is the continued conflict in the Middle East and that between Russia and Ukraine.

We’re here to help

If you have questions about your super investments, or you’re planning to switch the way you’re invested, we’d encourage you to speak with us first. We’re easy to get hold of, with most members only waiting a few minutes to speak to a real person. Contact our Member Services Team 1300 360 988 or email mail@firstsuper.com.au.

Stay up to date with investment updates by visiting our investment updates webpage and our investment performance page.

Disclaimer

Issued by First Super Pty Limited (ABN 42 053 498 472, AFSL 223988) as Trustee of First Super (ABN 56 286 625 181).

Past returns are not an indicator of future returns.

This article contacts general advice which has been prepared without taking into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and read the Product Disclosure Statement (PDS) before making any investment decisions. To obtain a copy of the PDS or Target Market Determination, please contact First Super on 1300 360 988 or visit our website at firstsuper.com.au/pds.