Quarterly market update: Oct 2019 to Dec 2019

Investment markets continue to rally 

Key Points

Our MySuper Balanced option returned 2.12% and our Balanced option for pensions returned 2.29% for the second quarter of FY 2019/20. 
The 2019 calendar year has been a year of strong returns for shares and most asset classes, more than recovering their losses from 2018.
Financial markets have shrugged off concerns about global growth and trade tensions, but diversification remains important, so don’t switch options based on past returns alone – talk to us first on 1300 130 780. 

How the markets performed 

Investment markets continued to rally in the second quarter of the 2018/19 financial year, finishing 2019 on a high. Optimism in late-2019 was driven by expectations that the US and China would sign a trade war truce, which eventually occurred in January 2020 with the signing of a “Phase 1” trade agreement. The election of Boris Johnson in the UK election in December 2019 eased some fears that we would see an even more disorderly Brexit process. Most major central banks around the globe continued to offer support to investment markets., This reduced recession fears over the quarter, all leading to a conducive environment for investing.  

The 2019 calendar year was particularly strong for investment markets, especially shares, with the US S&P 500 Index rallying by around 32% and the Australian share market rallying by nearly 23%. The weakest share markets in 2019 were markets like the UK (weighed down by Brexit concerns for most of 2019) and Hong Kong (where protests throughout 2019 have dampened economic growth and company returns), as seen in the following chart.

This was partly due to a weak starting point, as some readers may remember the weak returns in 2018 (especially late-2018) and the negative sentiment in December 2018 whilst the US Federal Reserve (“the Fed”) was increasing interest rates. As the Fed went from increasing rates in late 2018 to cutting rates in 2019, and most other central banks around the world did the same, negative sentiment was replaced by optimism, leading to the best year of returns since 2009. Indeed, 2009 was, coincidentally, also a year where negative sentiment was replaced by optimism (at the time, coming out of the GFC), highlighting that the best time to be investing in shares is often when investors are feeling negative about the market.

More than anything, 2019 reminded us all of the need to focus on the long-term and to keep calm and stay invested. This can be seen in the following chart, which shows the recovery in our MySuper Balanced returns, versus our Cash option over the same period.

Whilst no one knows for sure what 2020 will bring, the need for diversification remains high (rather than trying to pick just one asset class). Talk to us on 1300 130 780 if you are considering changing options.

Issued February 2020 by L.U.C.R.F Pty Ltd ABN 18 005 502 090 AFSL 258481 as Trustee for Labour Union Co-Operative Retirement Fund Super (LUCRF Super) ABN 26 382 680 883. It is general information only and has been prepared without taking into account your personal financial situation, objectives or needs. General information is not advice. You should assess your personal financial situation before making a decision about LUCRF Super. To help you decide we recommend you read our current Product Disclosure Statement (PDS), available at lucrf.com.au or by calling 1300 130 780.

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