Investment Update for August 2010

With uncertainty in Australian politics and no economic growth in any developed economies, investors showed a negative response and  reverted to defensive assets during August. Weak data coming from the US was not encouraging, especially in the housing market; another round of stimulus spending is being discussed by their Senate. However, fears of a double dip recession and deflation have re-surfaced, and as a result July’s positive momentum quickly turned negative in August. This has resulted in mixed results in Australia, with the ASX300, the major banks, and the IT sector down but listed property trusts, consumer staples and utilities up. Global share markets in local currency terms ended the month down -3.1%, and a depreciation in the Australian dollar saw unhedged investors return -2.1% for the month. Further,

  • regional level – government bonds continue to rally, although  a modest reversal was noticeable in US Treasure yields
  • aggregate level -emerging markets continued to outperform developed markets, showing a disappointing lack of developed growth globally
  • sector level – Telecommunications, Healthcare and Utilities performed well, while the Information Technology, Financials and Industrials sectors posted negative returns. Gold has increased in value as it is seen as a less risky investment

Some growth in Australian government bonds occurred resulting in the RBA keeping cash rates on hold.

Overall market performance – August 2010 Performance (income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation) -1.1
International Shares (MSCI AC World ex-Aust) hedged -3.1
Global Bonds (Barclays Global Aggregate (Hedged)) 2.1
Cash (UBS Bank Bills) 0.4
Appreciation of $A against $US -1.7
AvSuper performance: unit prices and quarterly performance results

Super is probably a key pillar in your retirement savings plan, and needs to be viewed as a long term investment. Investment performance varies year to year, but in the long term your super will grow and override short term market fluctuations. Comparing long term investment performance gives a better perspective of your super investment’s performance.

Looking ahead

The market is still responding to short term macro announcements, and focussing on emerging markets to drive global growth. Investors are divided on how and when a recovery will be seen, leaving everyone watching carefully for signs of future trends and movements.  

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