Delta makes its presence felt everywhere

The month of August 2021 was dominated by the resurgence of COVID-19’s Delta variant. Its presence continued to accelerate the negative impacts on global trade, with supply chains and manufacturing under severe pressure.

Some countries, like Australia and China, used snap lockdowns as a containment strategy, whereas others like the UK and US maintained business as usual practices, and are instead relying on their high vaccination rates to minimise the strain on their healthcare systems and hospitals.

Key economic insights from around the globe

Australia

August was a month of short snap lockdowns in Queensland and the Northern Territory, and extensions of lockdowns in New South Wales and Victoria, in response to the growing threat of the Delta variant. By 31 August, 35% of Australia’s population was fully vaccinated, with the Government’s phased re-opening plan seeming more realistic by the day.

But with 60% of Australia’s population still in lockdown at the end of the month, multiple joint funding packages from the state and federal governments were welcome news for both individuals and businesses struggling to stay afloat.

Economic data was mixed. Manufacturing and new inventory orders declined for the first time in 14 months as a result of the restricted mobility across the country. And labour figures revealed an increase in the number of people working zero hours due to the stay at home orders. However, the property market roared ahead, recording an astounding 46.5% of residential homes selling prior to auction in Sydney.

The Reserve Bank of Australia remained positive, indicating that it still believes the Australian economy will rebound strongly later this year and into 2022, and in support of this view announced its intention to reduce its bond purchases as planned from $5 billion to $4 billion a week.

US

At the annual Jackson Hole Economic Policy Symposium, US Federal Reserve Chair, Jerome Powell asserted that if the US economy continues its current recovery path, it may soon start to reduce the pace of federal asset purchases. However, interest rates will remain unchanged until maximum employment is reached, and short to medium term inflation should remain steady at close to the Federal Reserve’s lower range target of 2%. With a mix of success for the vaccine roll outs across the US, consumers seem concerned about a COVID-19 resurgence, preferring to save money rather than spend.

Asia

China’s response to containing COVID-19 has seen major container ship ports and factories shut down or limited. This has slowed manufacturing output, as well as impacting new order and employment rates. It has also led to global supply chain bottlenecks following disruptions to major trade routes and container shortages. At the same time, the Chinese government unveiled a 5-year plan to tackle monopolies and ‘foreign-related rule of law’, introducing new data protection laws in August with strict punishments for company non-compliance.

Japan continued to struggle with consumer confidence after the country’s state of emergency was extended into September and concerns remain over livelihood, income growth, employment and willingness to buy durable goods.

Europe

Europe’s gradual re-opening has led to growth in the services sector outpacing manufacturing, which was hampered by global supply chain issues.

The UK’s inflation rate finally reached the Bank of England’s target of 2% driven by rising prices in the second-hand car market, as shipping delays and consumers choosing to avoid public transport caused a shortage of car supply.

How did markets react?

Global markets were generally positive for the month, with the Hong Kong Hang Seng one of the few negative performers. Australian markets were mixed, with the lockdowns supporting the consumer staples, healthcare and telecommunications sectors, with energy and materials lagging.

Fixed interest markets were more volatile, although most recovered towards the end of August. Notably, the German 10-year Bund finished well, perhaps signalling that the European Central Bank may be starting to limit its emergency bond-buying program in response to rising inflation.

Interestingly, there was also a rally in the cryptocurrency market following its fall in May. PayPal launched its first cryptocurrency service in the UK, like its US offering, which is a positive step towards global cryptocurrency legitimisation in the still highly unregulated market.

What does this mean for your super?

With around 90%* of allocation to growth assets such as international and Australian shares and property, members in the BT Super and BT Super for Life 1970s, 1980s, 1990s and 2000s Lifestage investment options continue to benefit from strong share market performance, receiving returns between 1.97% and 2.04% for the month of August 2021 and between 23.55% and 23.71% for the 12 months ending 31 August 2021.

Members in the BT Super and BT Super for Life 1960s Lifestage investment option, which has growth exposure of around 60%*, saw returns of 1.45% in August 2021. Members in the 1940s and 1950s Lifestage investment options saw more moderate returns of 0.79% and 0.94% respectively as these options are designed to have less exposure to growth assets to help cushion their super balances from market volatility as these members move closer to retirement.

*From 1 July 2021


Performance returns by asset class as at 31 August 2021

Asset Class

1 month

1 year

3 years (p.a)

5 years (p.a)

Growth assets

 

 

 

 

Australian shares

2.61%

28.58%

10.13%

11.05%

International shares

3.10%

31.37%

14.68%

15.59%

Emerging market shares

3.21%

22.56%

9.48%

11.02%

Australian listed property

6.38%

31.75%

9.36%

7.13%

Global listed property

1.47%

32.88%

6.03%

5.24%

Defensive assets

 

 

 

 

Australian bonds

0.09%

1.05%

4.52%

3.33%

International bonds

-0.22%

0.55%

4.28%

2.93%

Cash

0.00%

0.04%

0.84%

1.22%

 

Source: BTIS. Australian shares - S&P/ASX 300 Accumulation Index, International shares - (/unhedged) MSCI World ex Australia Net Return in AUD, Emerging market shares - MSCI Emerging Markets EM Net Total Return Index (AUD), Australian property - S&P/ASX 300 A-REIT Accumulation Index, Global property - FTSE EPRA/NAREIT Developed Hedged in AUD Net TRI,   Australian fixed interest - Bloomberg AusBond Composite 0+ Yr Index, International fixed interest - Bloomberg Barclays Global-Aggregate Total Return Index Value Hedged AUD, Cash - Bloomberg AusBond Bank Bill Index. As at 31August 2021. Past performance is not a reliable indication of future performance.

You might also be interested in

Hear from Melinda Howes, Managing Director of BT Super about BT's FY2021 super performance.

YouTube video

Hear from Corrin Collocott, our Chief Investment Officer, for insight into the experience and investment approach of BT Investment Solutions.

YouTube video
FY21 has seen a rebound of markets and a return to calmer conditions – with BT super members receiving some of the highest returns seen in years.
Most major investment markets rose over FY21, with several hitting record levels as economies returned to pre-COVID levels of growth – which is good news for BT super members.

When it comes to reaping the rewards of super, it is time in the market, not timing the market. In other words, to make money, stay invested for as long as you can, and try not to worry about knowing when the 'best' time is to invest.

Our Lifestage super investing adapts as you move through stages of your life, with higher returns when you’re younger and reduced risk closer to retirement.

The information is prepared by BT Funds Management Limited ABN 63 002 916 458 (BTFM) the trustee of the following products:

(a) BT Super for Life, BT Super for Life Westpac Group Plan and BT Super part of the superannuation fund Retirement Wrap ABN 39 827 542 991; and
(b) Asgard Employee Super Account part of the superannuation fund the Asgard Independence Plan Division Two ABN 90 194 410 365. 

This information has been prepared as general advice only and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs before acting on it. Read the Product Disclosure Statement (PDS) to see if these products are right for you by visiting bt.com.au or asgard.com.au. Past performance is not a reliable indication of future performance. All examples are illustrative only. Your portfolio value and performance will depend on the investment options you have selected and the time over which they are invested. 

Investment returns are historical. Investment returns can move up or down and past performance is not necessarily indicative of future performance. Future performance is not guaranteed. Performance differences between the investment options and respective underlying funds exist due to factors such as valuation timing differences, differences in fees and charges, distributions (as cash may be retained for liquidity purposes) and higher cash holdings. More information on the asset allocation and risk exposures of each fund can be found in the PDS.

BTFM is a member of the Westpac Banking Corporation ABN 33 007 457 141 (Westpac) group of companies. An investment in these products is not an investment in, deposit with or any other liability of Westpac, any division of Westpac or any other company in the Westpac Group. Westpac and its related entities do not stand behind or otherwise guarantee the capital value or investment performance of the products or any related assets of the products.