Following a solid September quarter, super funds retreated in October in the lead-up to the US election, with the median growth fund (61 to 80% growth assets) down 0.7% for the month. This brought the return for the first ten months of 2016 to 4.1% so, with only six weeks of the year remaining, there is a good chance that funds will deliver a fifth consecutive calendar year return.
Key highlights include:
Listed share markets, which are the main drivers of growth fund returns, were down in October. Australian shares fell 2.2% while international shares were down 0.6% and 1.4% in hedged and unhedged terms, respectively. Listed property suffered on rising bond yields, with Australian REITs plummeting 7.7% and global REITs retreating 4.5%.
The nervous mood in financial markets continued in October. The most immediate concern was the outcome of the US election, while the future of global interest rates and the consequences of Brexit still prey on investors’ minds. We now have clarity on that first issue, of course, with Donald Trump coming away with a shock victory. However, along with his victory comes much policy uncertainty.
So far, stock markets around the world have, for the most part, taken Trump’s victory in their stride, defying predictions of a major slump. However, bond markets have taken a hit, based on expectations that the Trump administration will follow through on its promises to spend significant amounts on infrastructure and cut taxes.
Industry funds and retail funds performed in line with each other in October with a return of -0.8%.
