August 4 saw stock markets across Europe fall by 3% and the USA and Australia by just over 4%. A similar fall also happened on August 8.
This has been due to a number of factors including:
LUCRF Super’s main objective is to maximise returns for members and has a strategy to ensure your superannuation investments perform well over the long-term. The current strategy has been to invest a higher proportion in defensive assets (those that are more stable and secure) than would normally be the case. This allows us to lessen our exposure to the sudden market drops that are occurring at the moment.
The Australian stock market has a high level of foreign investors. These investors are impacted by global conditions and market perception, which affects their commitment to remain invested.
Consumption and economic growth in the developed world are expected to be weak in the near future, and this affects all economies. If growth in Europe, Japan, UK and the US declines then this flows through to growth in China. If Chinese investment slows, then demand for Australia’s major exports will also decline, leading to lower profits which ultimately mean lower returns from the Australian investment markets.
The high Australian dollar also affects Australian businesses as our exports are more expensive to buy while imports become cheaper. This means Australian produced goods and services become less competitive which negatively affects the local economy. It also becomes more expensive for tourists to travel to Australia. There are also signs of slowing consumption (people are spending less) in the domestic economy. All of these factors (and many more) lead to lower or negative investment returns in the short-term.
LUCRF Super has made a number of changes over the last financial year, some as a result of lessons learnt from the Global Financial Crisis (GFC), others as part of either improving returns or reducing risk. Some specific examples include:
Whilst the financial markets are down, LUCRF has a strategy to minimise the impact on members.
It is also important to remember that super should be viewed as a long-term investment. LUCRF’s long-term return for our Balanced option has produced an average rate of 10.02% since inception (1978 – 2011).
If you have any questions or would like to discuss your investments with a financial adviser, please call us on 1300 130 780.