Investment update for December 2013
Strong US economic data led to the US Federal Reserve (the Fed) announcing the tapering of their quantitative easing program in mid-December. Monthly purchases by the Fed will decline to US$75B. This is a US$10B reduction, split evenly between government and mortgage-backed securities. The timing of tapering came ahead of market expectations, however, investors generally reacted positively due to a combination of improving US economic activity and a commitment by the Fed to keep short-term interest rates low for an extended period. In Europe, the most recent data releases continue to point toward positive economic growth, however, overall conditions remain depressed and inflation remains below target. Data releases in China were broadly in line with expectations, while in Australia the RBA left the Cash Rate unchanged at 2.50% as it continues to monitor the impact of past rate cuts and the lower Australian Dollar.
The MSCI World ex-Australia Index (hedged to $A) rose 2.4% over the month and the decline of the Australian Dollar against most major currencies resulted in a higher return of 4.5% (in $A) on an unhedged basis. Across developed markets the strongest performing country in local currency terms was Japan, however, from an Australian investor’s perspective a portion of the strong equity market performance was offset by currency weakness. The US also performed strongly (2.7%), while the UK and Germany were weaker on a relative basis.
The S&P/ASX300 Accumulation Index (0.8%) underperformed hedged global equities. After moving lower early in the month the index recovered to produce a positive absolute return following the Fed’s tapering announcement. The Energy and Telecommunications sectors were the strongest performers, while Financials and Property Trusts produced negative absolute returns. Small cap stocks outperformed large caps with relative performance mostly driven by small Resources. The S&P/ASX 300 Property Trusts Index lagged domestic unlisted property.
Broad stock market performance – December 2013
(income and capital gain or loss) %
|Australian Shares (S&P/ASX 300 Accumulation)||0.8|
|International Shares (MSCI AC World ex-Aust)||4.5|
|Global Bonds (Barclays Global Aggregate (Hedged))||-0.4|
|Cash (UBS Bank Bills)||0.2|
|Appreciation of $A against $US||-2.1|
|Check out AvSuper’s weekly returns and quarterly performance results|
*Estimate as at 10 January 2014
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.