The emergence of a new threat unsettles markets

Just as we thought the world was adjusting to living with COVID-19, a new variant of concern ‘Omicron’ emerged. Combined with ongoing inflationary woes and rising oil prices, it was a difficult month for global share markets.

Key economic insights from around the globe

Australia 

November signalled a new milestone in Australia, with 80% of those aged 16 and older fully vaccinated. It also saw the return of international travel for fully vaccinated Australians. In more good news, Pfizer announced its experimental anti-viral pill was successfully reducing hospitalisation and death rates by nearly 90% in high-risk adults, as well as news that longer-term analysis of the vaccine shows a 100% efficacy in adolescents aged 12-15.

All this led to an increase in foot traffic in recreational and retail venues after lockdowns were lifted in NSW and Victoria. Consumer sentiment has been remarkably resilient throughout the Delta variant lockdowns compared to 2020, supported by solid vaccination rates and exit roadmaps providing greater certainty when looking ahead.

The Reserve Bank of Australia indicated it will end its emergency stimulus measures. It believes the inflationary outlook in Australia is different to other developed economies, placing less pressure on wages growth. 

US

Strong share market growth at the beginning of November came from good October jobs data and news of a new US$1 trillion infrastructure spending bill.

By month end, markets wobbled as inflation rose at the highest rate in 31 years causing consumer confidence to fall. And oil prices rose sharply, despite President Biden’s plan to release strategic oil reserves to counter demand. The US Federal Reserve also announced it would scale back its monthly bond-buying programme, clearing the way for rate hikes potentially as soon as the second half of 2022. 

Asia 

Concerns continued over China’s slowing growth as the economy struggles with harsh COVID-19 restrictions amidst new outbreaks. Nationwide power shortages also affected factory production and the financial regulators asked Chinese banks to issue additional loans for property projects to ease liquidity pressures.

Japan was more positive after Prime Minister Fumio Kishida won the Liberal Democratic Party majority and further government stimulus support was all but guaranteed. 

Europe 

The northern hemisphere winter and waning immunity from vaccines delivered a surge in COVID-19 case numbers across Europe. Lockdowns re-emerged and restrictions tightened in many countries, putting extra strain on an already shaky economic recovery. Despite this, the European Central Bank confirmed it will end its emergency bond-buying programme in March 2022, stating that each wave of COVID-19 has less economic impact than the previous one.

How did markets react?

After a positive start to the month, news about the Omicron COVID-19 variant sent shockwaves throughout the world and global financial markets.

By month-end, most markets recorded weak performance. In Australia and the US, most indices finished in slight negative territory. European markets were weaker given the region’s worsening COVID-19 situation, but Asia fared worse, with the Hong Kong Hang Seng down 7.49% and the Korean KOSPI 4.43% lower.

The US dollar was the only major currency to experience a good month, as stronger inflation suggested that the US Federal Reserve would be the first to raise its cash rate.


Performance returns by asset class as at 30 November 2021

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

Growth assets

       
Australian shares -0.53 16.02 12.89 10.30
International shares 3.70  26.81 18.19    15.70   
Emerging market shares 1.61    6.72 10.35   10.42   
Australian listed property    3.96   21.43    12.13  10.22
Global listed property -1.45    24.49    6.05    6.44   

Defensive assets

       
Australian bonds 2.08 -3.23 3.35    3.30   
International bonds 0.74    -0.84    4.16    3.34
Cash 0.01 0.02 0.68 1.14

 


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 30 November 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 while share markets were weak in November, our one-year returns continued to be strong, with members earning between 15.13% and 15.29% for the 12 months ending 30 November 2021. 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, earned a solid 9.87% for the 12 months to 30 November 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. Our one-year returns continued to be in line with the product’s design, with the 1940s option returning 4.46% and the 1950s returning 5.79%.

Returns for BT MySuper Lifestage funds 30 November 2021

Investment option name 

 1 month
%

1 year
%

3 years
(pa) %

5 years
(pa) %

7 years
(pa) %

10 years
(pa) %

BT MySuper 1940s Lifestage 0.38 4.46 4.99 4.08 3.47 4.41
BT MySuper 1950s Lifestage 0.37 5.79 5.80 4.80 4.15 5.68
BT MySuper 1960s Lifestage 0.31 9.87 8.21 6.97 5.90 7.55
BT MySuper 1970s Lifestage 0.21 15.13 11.12 9.46 7.84 9.37
BT MySuper 1980s Lifestage 0.20 15.15 11.20 9.52 7.93 9.55
BT MySuper 1990s Lifestage 0.19 15.23 11.36 9.66 8.04 9.67
BT MySuper 2000s Lifestage 0.19 15.29 11.46 9.84 8.42 N/A*

Note: Performance figures are calculated to 30 November 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.

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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: 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.

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.