Investment update for December 2010

A rise in both domestic and global share markets finished 2010 and economic forecasts for 2011 have been propped up by the second round of quantitative easing and renewed tax stimulus measures in the USA. Good economic data from Germany was countered by continued fears of Eurozone sovereign-debt problems and possibly downgrades of Spain and Greece. The Australian market finished the year 3.8% up for December, influenced by the RBA leaving rates unchanged and US tax-break extensions. However heavy rains and flooding in Qld which caused a number of miners and other companies exposed to the sector to flag possible downgrades contributed to a late sell off. IT, Energy and Materials sectors performed well, but Consumer related stocks were weaker reflecting troubled retail sales expectations. Utilities (again) and Telcos, also lagged the broader market. Listed Property Trusts at last found some relief with a positive return for the month, but they have continued to underperform both the ASX 300 Index and global REITS. The S&P500 had its best rally in nearly twenty years with some stocks reaching their highest levels in December. Global share markets rose by 5.9% in local currency terms but the return for unhedged investors was only 0.4% due to the strength of the AUD against the Euro, USD and Pound sterling. Energy and materials sectors were positive for December, as were Emerging Markets although with lower returns. Consumer Staples and Discretionary were weak, with Healthcare and Utilities also underperforming. In the Bond markets the yield on bonds in all regions rose including the yield on Australian 10 year Government bonds. Credit related spreads changed little as issues remained firm. Better economies, such as Australia, have shown higher yields while weaker economies have widened their spreads under the threat of further downgrades by ratings agencies.

Looking ahead

Some of the key economic indicators have continued to improve into the year-end, especially in some key economies such as the USA and Germany. Elsewhere China is endeavouring to cool domestic growth to combat rapidly rising inflation. The expectation is that China cannot afford to allow growth to slow too much, and economist predictions for world growth in 2011 are for 4.4% growth with potential for even higher growth if the US recovers more strongly than is currently forecast.

Broad stock market performance – December 2010

Performance (income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation) 3.8
International Shares (MSCI AC World ex-Aust) hedged 0.3
Global Bonds (Barclays Global Aggregate (Hedged)) 0.0
Cash (UBS Bank Bills) 0.4
Unlisted property 0.5
Appreciation of $A against $US 6.9
Check out AvSuper’s weekly returns and quarterly performance results Please note that past performance is not always a reliable indicator of future performance.

 Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays

We trust you find this information useful in understanding how your AvSuper investment is performing and welcome your feedback on how we can improve the information we provide to you.

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