How your super performed: July-September 2024

Curiously, the July-September quarter is generally thought of as a “subdued” time of year in stock markets. As the new financial year kicks into gear, conventional wisdom says it’s not the time for markets to boom. But this most recent quarter saw superannuation returns defy those conventions.

ICYMI: here’s what's happened in the market, and what's influenced the numbers. Remember, your super is a long term investment and the way your super is invested is designed to withstand the ups and downs of markets.

The big picture

Globally, there were a few factors impacting investment markets last quarter. Early in the quarter, the Bank of Japan hiked interest rates and weak US labour market data raised fears of a looming economic slowdown. These factors might’ve spooked investors because markets were down.

But in September, a couple of events spurred stock markets to rise.The US Federal Reserve cut interest rates by 50 basis points – that rate cut gave investors confidence that inflation is getting under control, a positive economic signal. Then, China launched larger than expected monetary and fiscal policy stimulus, the most significant since 2015, to support the weaking Chinese economy. This gave investors reason to be positive about the outlook for the Chinese economy, which is a huge factor in global markets.

The local story

In Australia, the economic story is still all about interest rates. We know, it’s not the most exciting subject. Australia’s inflation is declining at a slower rate than other countries, and that might be because the Reserve Bank of Australia has taken a bit of a “slow and steady” approach to interest rates, raising them repeatedly by small amounts rather than hitting us with an aggressive hike.

The thinking from the RBA is that this strategy should somewhat mitigate the adverse effects of high living costs on Australians, while also curbing potential shocks to the labour market. But on the ground, of course, cost of living pressures are being keenly felt regardless. It’s a trade off because while this approach might avoid shocks, it means inflation is declining at a slower rate and we haven’t seen any rate cuts.

Outside of shares traded on stock markets, your super is invested in a variety of assets including bonds. Bond yields, the amount these investments pay investors, are impacted by interest rates. The RBA’s stance on interest rates is likely to be more supportive of yields than in overseas markets because it offers stability. This may increase demand for local bonds, particularly from international investors seeking yield (AKA the return investors get from bonds) and relative economic stability. 

Stock market news

Have you heard of the Magnificent Seven?  It’s a term used to refer to the seven tech companies that have been leading the US stock market for some time now. They are: Alphabet (the parent company of Google), Amazon, Apple, Meta (owner of Facebook, WhatsApp and Instagram), Microsoft, Nvidia and Tesla.

We don’t invest in every one of those companies because some of them don’t pass our screens. But we do invest in Nvidia, an artificial intelligence company which has been enjoying extraordinary success lately.

The Magnificent Seven have earnt their name for outperforming the rest of the market. But in the September quarter, a wider spectrum of international companies delivered solid performance. The gap in earnings between US tech stocks and other listed companies has narrowed.

Closer to home, familiar fixture of your local shopping centre JB Hi-Fi reported sales growth, driven by the ability to maintain supply chains and meet demand for home entertainment, computing, and appliances.

And another interesting Australian story came from Vulcan Energy. Vulcan is a lithium company, focusing on producing zero-carbon lithium for electric vehicle batteries. The company has seen significant stock growth due to its innovative approach to sustainable lithium production. Demand for lithium is expected to continue to grow to meet the demands of the electric vehicle market.

The numbers

Returns are not guaranteed and past performance is not a reliable indicator of future performance.