Despite a strong start to the quarter, the volatility financial markets experienced in September reversed many of the gains investments made in July and August. Scott Tully, General Manager of Investments, offers insight into investment performance last quarter.
How did investments perform over the September quarter?
While investments performed well in July and August, some of the gains they made were reversed in September. For example, while Australian fixed interest generated a positive return of about 1%, Australian shares fell about 1% due largely to the poor performance of large-cap stocks. Globally, fixed interest delivered a positive return of about 1%. Global shares, when hedged to movements in the Australian Dollar, rose 6.5%. The higher Australian Dollar meant the returns of unhedged global shares returned a lower – but still positive – return of 4%.
What were the drivers behind market performance?
Despite a strong start to the quarter, the fall financial markets experienced in September reversed many of the earlier gains. During this time, investors looked beyond Coronavirus to other developments. In Australia, companies announced their full-year results during reporting season, while Australia moved into its first official recession in almost 30 years. Globally, vaccine developments, technological tensions between the US and China, political rhetoric surrounding the US presidential election, and volatility across technology stocks led to fluctuations in share markets.
We anticipate that financial markets could experience periods of volatility over the coming months – particularly as vaccine testing continues, as we approach the end-of-year Brexit deadline and in the lead up to the highly anticipated US presidential election. When markets experience volatility, it’s natural to feel some concern. But experience tells us that markets do eventually recover – and we’ve already begun to see this, with markets increasing by as much as 25% over the last six months.
How is Colonial First State supporting you?
Our team is always monitoring changing developments and communicating closely with our skilled investment managers. This means that no matter the state of economics or financial markets, our team is up to date on the risks and opportunities of investing. This enables us to continue making more informed investment decisions, and helps us keep you informed – each step of the way.
Until the next update, we’d like to thank you for your continued support.