Investment update for December 2014

US rides positive economic momentum

Global context

The US ended the year on a positive note, and a rapidly growing labour market and reduced petrol prices should provide momentum going into 2015. The outlook for Europe was less optimistic as disinflation worries resurfaced during the middle of the month. Greece also re-emerged as a troubled economy during the first half of the month. Despite ending the year soundly, questions remain over the sustainability of GDP growth rates for Asian economies in 2015. Russia’s economy has been hit hard by the continued plunge of oil prices (down nearly 20% in December). The Ruble traded at or around all-time lows throughout the month.

International markets

The MSCI World ex-Australia Index (hedged into AUD) fell 0.6% over the month. New Zealand, Australia and Singapore were the strongest performing sharemarkets across the developed markets. The weakest markets were Greece, Italy and Portugal. Emerging markets trailed developed markets. Health Care and Industrials led the way from a sector perspective, while Consumer Discretionary and Energy struggled. Consumer Staples and Materials also finished the month in the red.

Australian markets

The S&P/ASX300 Index appreciated 2.0% over the month. The performance was largely positive across the board with the MidCap 50 a standout, appreciating 3.9% for the month. Large Caps and Small Caps both recorded a positive month with 2.0% and 0.5% growth respectively. Performance was negatively impacted by Resources that suffered again due to market concerns in relation to Chinese economic growth and the consequent impact on Oil and Iron Ore prices. From a GICS Industry Group perspective, Health Care and Capital Goods led the way while Consumer Services and Retailing struggled.

Currency

The U.S. dollar routed nearly every currency in our universe. Positive economic momentum pushed the dollar to nearly decade-long high valuations in December, capping the strongest trade-weighted performance in a calendar year since 1997. Currencies of energy exporters fell in value substantially, with the Brazilian real (down 3.5%), Canadian dollar (down 1.7%), and Malaysian ringgit (down 3.3%) all plummeting alongside declining energy commodity prices. The Mexican peso (down 5.6%) also fell precipitously on the collapse in oil prices and strong U.S. data.

*Estimate as at 6 January 2015 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.