Investment update for October 2010

Investment markets were relatively flat during October after a strong September quarter. The Australian dollar continued to strengthen, although with some volatility, and even reached parity with the US Dollar (USD) during the month. The USD remains under pressure, given continuing concerns about the US economy and the expectation of further stimulus activity. US companies’ results were generally positive in the release of earnings. Combined with an expectation of further quantitative easing measures by the US Federal Reserve, this led to modest gains in the US market. In Australia, the ASX300 returned a positive 1.8% for the month of October with the Materials, Information Technology, Telecommunications and Energy sectors performing well, and all sectors showing positive results. At 5.6%, the strongest sector was Materials following a rise in commodities prices and the continued Asian demand for Australian commodities. Both the US Treasuries and Australian Government 10 year Bonds finished the month higher, while credit spreads tightened in both countries.

Looking ahead

As has been the case for many months, investment markets remains volatile, and continue to react (or over react) to signals that appear to indicate the future path of the global economy. Excessive debt in the US and talk of more quantitative easing (ie printing money and buying US Treasuries) are major factors influencing investor decisions. On the home front, despite a strong Australian Dollar, the growth of the domestic economy and the risk of medium term inflation have led to expectations of future interest rate rises by the Reserve Bank. In addition, the debate surrounding the increase in bank funding costs has increased the potential for banks to raise rates, independent of the Reserve Bank.

Broad stock market performance – October 2010

Performance (income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation) 1.8
International Shares (MSCI AC World ex-Aust) hedged 2.4
Global Bonds (Barclays Global Aggregate (Hedged)) 0.3
Cash (UBS Bank Bills) 0.4
Appreciation of $A against $US 1.2
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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