Markets focused on future sustainability

Climate change and energy supply woes dominated discussions in October 2021 as world leaders prepared for the United Nations Climate Change Conference (COP26). 

Over the month we also saw global markets lift as stronger-than-expected company earnings were reported in the US, and as fears of earlier-than-expected interest rates rise dissipated.

Key economic insights from around the globe

Australia 

Australia’s vaccine rollout continued at a rapid pace, with the vaccination rate passing Israel – the previous poster child for rollout success. In October 2021 states began to re-open. The Prime Minister announced plans to open international borders, and Australian residents were able to leave and return from 1 November 2021. This led to an increase in consumer and business confidence, particularly in the recreation and personal services sectors.

The Australian property market was the hot topic of the month. The national dwelling price index rose 1.5%, taking the annual increase to 21.6% - a level not seen since October 1989. Regulators expressed concern over the pace and sustainability of such growth, and the Australian Prudential Regulation Authority (APRA) stepped in to limit the borrowing capacity of buyers.

Research by PWC and Deloitte indicated Australia could follow in the US’s footsteps and experience ‘The Great Resignation’ – with almost 40% of workers planning to change jobs in the next 12 months. This could threaten employment stability and lead to talent drain in certain industries.

In the lead-up to COP26, the Government committed to cut emissions to 26% below 2005 levels by 2030, in its effort to reach net zero by 2050. 

US

All conversations in the US during October 2021 were about government spending. The Senate agreed to temporarily raise the Government’s debt ceiling to US$28.9 trillion, giving lawmakers until 3 December 2021 to pass legislation that will prevent a government shutdown.

The Federal Reserve announced it would taper asset purchases. At the same time, the US Department of Housing and Urban Development announced over US$2 billion in recovery and mitigation funds to nine US states and Puerto Rico in response to 15 separate natural disasters.

Asia 

China’s September quarter growth numbers were disappointing. Power shortages and higher material and energy costs also put a strain on its industrial sector over the quarter. 

The property sector stayed on watch as Evergrande missed another payment to debtors. China’s Central Bank assured investors the situation is controllable. But with half of the world’s distressed debt tied up in Chinese real estate, further signs of instability are worrying.

Europe 

Europe remained caught up in its own energy worries. Economists are concerned strong winter demand for energy will see price hikes for consumers and boost inflation. Some Eastern European countries have already taken action, with the Czech, Polish and Hungarian central banks all raising interest rates to tackle inflation over the past year.

How did markets react?

After a lacklustre September, the Australian, US and European markets delivered positive returns over October. US markets saw particularly strong returns – the S&P 500 Index returned 7.01% and the NASDAQ 7.29%. Asian markets were mixed, with only Hong Kong’s Hang Seng recording positive returns. 

In contrast, continued concerns over energy prices, causing inflation to lift, saw bond markets in negative territory for the month.

The Australian dollar was strong against most currencies, after the core inflation number grew at its fastest annual pace since 2015 in the September 2021 quarter.


Performance returns by asset class as at 31 October 2021

   
Asset Class
   
1 month
%
   
1 year
%
   
3 years
(pa) %
   
5 years
(pa) %

Growth assets

       
Australian shares 0.10 28.57 12.26 11.03
International shares 1.65  31.36 16.05    15.88   
Emerging market shares -2.88    9.35    10.15    9.68   
Australian listed property    0.60    31.85    10.59    9.53   
Global listed property 5.58    41.12    7.83    6.48   

Defensive assets

       
Australian bonds -3.55    -5.30    2.72    2.58   
International bonds -0.26    -1.05    4.06    2.85   
Cash 0.00 0.03 0.73 1.17

 

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 31 October 2021. Past performance is not a reliable indication of future performance.

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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.

What does this mean for your super?

Members in the BT Super and BT Super for Life 1970s, 1980s, 1990s and 2000s Lifestage investment options have around 90% of their super invested in growth assets (shares and property) and as such have benefited from the share market rebound in October 2021, earning positive returns of between 1.20% and 1.22% for the month. 

And their one-year returns continued to be solid, with members earning between 23.74% and 23.92% for the 12 months ending 31 October 2021. These members have also seen improved performance over the medium and longer term.

Members in the BT Super and BT Super for Life 1960s Lifestage investment option, with around 60% invested in growth assets, also benefited from the strength in share markets over the month. They earned 0.43% for the month and a solid 15.35% for the 12 months to 31 October 2021. 

The 1940s and 1950s Lifestage investment options have a higher proportion invested in defensive assets to help cushion these members’ account balances should negative market events happen. With less exposure to riskier assets such as shares and property (35%-42%), the 1940s and the 1950s members received slightly negative returns of -0.27% and -0.06% respectively for the month. However, their one-year returns continued to be solid, with the 1940s option returning 6.91% and the 1950s returning 8.94%.

Returns for BT MySuper Lifestage funds 31 October 2021

Investment option name 

 1 month
%

1 year
%

3 years
(pa) %

5 years
(pa) %

7 years
(pa) %

10 years
(pa) %

BT MySuper 1940s Lifestage -0.27 6.91 4.77 3.98 3.50 4.30
BT MySuper 1950s Lifestage -0.06 8.94 5.55 4.79 4.21 5.53
BT MySuper 1960s Lifestage 0.43 15.35 7.86 7.19 5.99 7.38
BT MySuper 1970s Lifestage 1.20 23.74 10.67 9.90 7.97 9.19
BT MySuper 1980s Lifestage 1.20 23.76 10.75 9.96 8.06 9.36
BT MySuper 1990s Lifestage 1.21 23.91 10.90 10.12 8.18 9.46
BT MySuper 2000s Lifestage 1.22 23.92 11.06 10.32 8.55 N/A*

Note: Performance figures are calculated to 31 October 2021 in accordance with the APRA reporting standards. Total returns are calculated using withdrawal prices appropriate for the month end and take into account management costs and monthly administration fee and take into account earnings tax up to a maximum of 15%. *The BT MySuper 2000s Lifestage investment option has been open for less than 10 years.

From soaring energy prices across Europe, a potential credit crisis within the Chinese property market, to debt ceiling issues in the US, each region faced its own pressures during September 2021.

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. The issuers of the products named in this article can be found in the relevant disclosure documents. Read the disclosure documents for your selected product before deciding. Target Market Determinations for our products can be found here. 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.