Investment market update - July 2012

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UniSuper's Chief Investment Officer, John Pearce, provides a market update for UniSuper members.

The following is a brief summary of investment markets over the 2012 financial year. A comprehensive review of the options' performance will be published in the next update upon the finalisation of the crediting rates.

 
% Change
 
Month
Financial Year
3 Years p.a.
5 Years p.a.
Australian Shares
(ASX 300)
0.5
-7.0
5.6
-4.2
US Shares
(S&P 500)
4.1
5.4
16.4
0.2
Asian Shares
(MSCI Asia)
1.6
-11.3
6.1
-1.0
Australian Dollar
(AUD/USD)
5.2
-4.6
8.3
3.8
Australian Fixed Interest
(UBSA Composite)
-0.2
12.4
8.6
8.2
Cash
(UBSA Bank Bill)
0.3
4.7
4.5
5.3

Returns are for periods to 30 June 2012. Past performance is not an indicator of future performance.

Equity markets began the 2012 financial year on a weak note. In August 2011, political bickering in the US caused an escalation in the debt ceiling crisis. As the European politicians hadn't stemmed their debt crisis, the combination proved to be too much for global sharemarkets to withstand, and by the end of 2011 equities were still well into the red over six months.

However, some signs of life in equities in late 2011 flowed through to 2012, propelling US stocks to their best three-month performance since 1998. There were several factors that led to the better mood in investment markets. An infusion of liquidity by the European Central Bank on top of an interest rate cut helped stabilise the European debt crisis. Meanwhile in the US, continued improvement in economic data – including modest growth in employment and consumer spending, alongside the accommodative policies of the Federal Reserve – helped prolong the positive momentum.

Unfortunately, Australian equities were not able to keep pace with the majority of the developed world. Much of the underperformance can be explained by a slowdown in Asia (Australia has a large resources sector exposed to a slowing Chinese economy), weaker house prices (wealth effects on saving/spending decisions), a high Australian dollar (AUD, which peaked at 1.10 in July 2011), relatively high interest rates (despite RBA cuts of 1.25%), new taxes, anaemic productivity and a tightening of fiscal policy.

This information is of a general nature only and includes general advice. It has been prepared without taking into account your individual objectives, financial situation or needs. UniSuper’s investment strategies will not necessarily be appropriate for other investors. Before making any decision in relation to your UniSuper membership, you should consider your personal circumstances, the relevant product disclosure statement for your membership category and whether to consult a licensed financial adviser. This information is current as at 30 June 2012 and is based on our understanding of legislation at that date. Information is subject to change. Issued by UniSuper Management Pty Ltd on behalf of UniSuper Limited, the Trustee of UniSuper.