Weathering recent market ups and downs

We look at what's been happening in markets over the last few months and how it may affect your super return.

Through your super, you generally have a wide range of investments such as shares, property and cash. Most of these investments are listed on global market exchanges or are publicly traded and are usually priced daily. This means that the value of your super will move up and down with market movements. In this article we look at what’s been happening in markets over the last few months and how it may affect your super return.  

Sharemarket falls

Since the beginning of 2016 share market returns have been lower than expected. This is mainly because investors are nervous about growth in a world where we already have low growth and low inflation. China is showing signs that its growth has slowed more than expected, Europe has been providing stimulus to help its economies and, although the US market is improving, the US Federal Reserve hasn't increased interest rates. This has led to a lot of volatility in markets.

This has affected the Australian sharemarket with a -9.6% pa return on Australian shares1 for the year to 31 March 2016. Over the same period international shares2 returned -3.1% when currency impacts are taken into account (also known as hedged). And the recent rise in the Australian dollar hasn’t helped international shares where they were unhedged, returning -3.9% pa.

The following table shows short and long-term performance for some typical investments.


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Understanding market
ups and downs

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Figure 1: Investment markets - performance snapshot

Return on asset 1 month (%) 3 month (%) 6 month (%) Financial year to date (%) 1 year (%) 3 year (% pa) 5 year (% pa) 10 year (% pa)
Australian shares 4.7 -2.8 3.6 -3.3 -9.6 5.4 5.7 4.4
International shares (unhedged) -1.0 -5.8 -4.2 -3.8 -3.9 18.7 13.3 3.5
International shares 5.2 -1.8 4.7 -3.1 -3.1 11.2 11.0 6.1
Australian listed property 2.4 6.4 12.8 14.0 11.3 16.3 15.9 2.6
Global listed property 7.6 4.7 10.9 13.2 4.4 11.8 13.1 5.4
Australian bonds -0.2 2.1 1.8 4.0 2.0 5.4 6.6 6.3
International bonds 0.9 3.7 4.3 6.3 4.5 6.1 7.8 -
Cash 0.2 0.6 1.1 1.7 2.2 2.6 3.2 4.4

Past performance is not a reliable indicator of future performance.

Source: Bloomberg ,AMP Capital, as at 31 March 2016; Australian shares: S&P ASX 200 Accumulation; International shares (unhedged): MSCI World ex AU Accumulation (AUD); International shares (hedged): MSCI World ex AU Accumulation Hedged AUD; Australian listed property: S&P ASX 200 A-REIT Accumulation; Global listed property (hedged): FTSE EPRA/NAREIT Deve Rental Hedged AUD Blended; Australian bonds: Bloomberg AusBond Composite 0+ Yr Index; International bonds (hedged): Barclays Global Aggregate Index Hedged AUD; Cash: Bloomberg AusBond Bank Bill Index.

Adjusting to a lower return world

Sharemarket falls are a normal part of the way the sharemarket works, so if you have an investment in shares, or through your super, they can affect your return on investment.

This year, annual returns will be affected by the combination of low inflation and lower than usual global growth. This means investments are likely to make single digit, rather than double digit, returns. And if we take a longer-term view, over the next five to 10 years, it’s likely that the return on a typical balanced fund will be 7-7.5% pa. This is compared to the average 14% pa we saw over the period from 1982 to 20073. With inflation now at a much lower level, this is not a bad outcome.

What this means for you and your super

Super is a long-term investment, so don’t be too concerned about short-term ups and downs. It’s important to stick to your long- term super strategy.

If you sell your shares, or change your super investment portfolio when sharemarkets are down, you could potentially make a loss, so you should seek financial advice before you make any changes.


1 As measured by the S&P ASX200
2 As measured by the MSCI World (excluding Australia) Index returned -3.9% (before currency impacts)
3 Based on a theoretical diversified growth mix of assets (with franking credits and pre-fees and taxes)

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While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.

© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.