What goes down usually goes up!
Against all expectations at the start of the financial year, returns from most asset classes over that period proved to be resilient, recovering all the previous year’s negative returns.
Balanced super funds returned a median 8.5% over the year
Super Ratings last week revealed that the median return across all balanced super fund options was +1.2% for the month of June, and a solid +8.5% for the financial year. This compares with the previous financial year median return of -3.4%.
Super Ratings also confirmed that the average annual return since the implementation of the superannuation system is currently +7.1%. This emphasises the importance of taking a long-term strategy with superannuation.
The risks now move from surging inflation to strong labour markets
This time last year investors were grappling with uncertainty about the speed at which central banks would return interest rates to levels that would bring surging global inflation under control. This raised fears of a global recession. The ‘most expected recession ever’ was predicted for the US.
The 2022-2023 financial year has ended – but investors are still trying to interpret the current economic environment and what it means for investment returns for the financial year ahead.
Persistent inflation, tight labour markets, and rising cash rates remain as the core concerns. Even so, developed market economies have proven to be resilient and labour markets have remained strong. This has led to a slower rate of decline in inflation than had been projected.
Wages pressures have moderated, yet remain persistent, especially in the services sector. Hence, central banks have needed to raise interest rates somewhat higher than most anticipated.
Higher rates for longer provide key risks for investors
Most analysts now expect continued progress in the fight against inflation, with central banks keeping interest rates in restrictive territory for longer. As a result, I expect some economic weakness in the months ahead.
In Australia, the unemployment rate has flirted with near 50-year lows – but it is likely to rise over the year ahead. As financial conditions continue to tighten, the expectation is 4% at the end of 2023, and 4.75% over 2024.
Vanguard recently released their expected 10-year asset class returns
For Australian investors, Vanguard’s 10-year annualised return forecasts are:
|+3.4% to +4.4%
|+3.6% to +4.6%
|+4.3% to +6.3%
|+5.0% to +7.0%
Kauri Wealth Investment Portfolio – returns on equity allocations continue to exceed benchmarks
It has been another year of attractive returns from equities in the portfolio, with both the allocation to Australian and International equities once again exceeding benchmark returns.
The Australian equities allocation returned +16.6% over the financial year, and the international equities allocation returned +17.4%.
The main drivers were: quality exposure to sectors benefiting from the ongoing COVID reopening; digital disruption; healthcare; and gold.
All clients will receive their portfolio performance reports in August.
Sources: Reuters, Vanguard, ASX, Bloomberg, Super Ratings
Please don’t hesitate to contact me should you have any questions.
Kauri Wealth Management is a Fee for Service investment advisory business and as such my advice is built around ongoing personal relationships with my client base. Personalised independent advice is backed up by a breadth of industry knowledge.
I accept a limited number of new clients each year and would be happy to discuss this further with you. Please don’t hesitate to contact me.
Phone: +61 439 852 963
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