In the year leading up to 30 June 2024, the world’s stock markets did well overall. Prices weren’t rising as fast as they were in 2022, but they were still going up more quickly than central banks would like. Because of this, interest rates stayed higher than we’ve been used to in recent years.
Our default Balanced growth (taxed) investment option, which is where most of our members have their super invested, returned -0.17% in the last three months of the year (April to June 2024) but for the full financial year, it gained 8.42%.
When we compare our Balanced growth option to similar options from other super funds, we did okay, but were not among the top funds for the year – unlike last year when we were number two in the country. We were below the middle of the pack, coming in at number 33 out of 45 funds.
Remember, though, your super is meant to grow over many years. So while it’s good to know how we did this year, it’s more important to look at how we perform over a longer time. Our MySuper Balanced growth option remains in the top 10 over 5 and 10 years – see table below.
Table 1: MySuper Balanced growth (taxed) performance (periods ending 30 June 2024)
1 year | 5 year | 10 years | |
|---|---|---|---|
Return (annualised) | 8.42% | 7.03% | 8.44% |
Rank* | 33 out of 45 funds | 4 out of 43 funds | 6 out of 37 funds |
* SuperRatings Fund Crediting Rate survey, SR50 MySuper Index, June 2024
During the last financial year, stock markets generally did well, but the US market really stood out. The main US stock market index, called the S&P 500, went up by 24.6%. This was more than twice as much as the Australian stock market index (the ASX 200) grew (see chart 1).
The big reason for this difference was a group of seven huge tech companies in the US. These companies, sometimes referred to as the “Magnificent-7” include Google’s parent company Alphabet, Amazon, Apple, Facebook’s parent company Meta, Microsoft, Nvidia, and Tesla. They did exceptionally well, mainly because of all the excitement around artificial intelligence (AI).
In fact, these seven companies did so well that they skewed the whole picture of the US market. If you took these companies out of the equation, the US stock market would have performed about the same as other major stock markets around the world (see chart 2).
This shows how a small number of very large companies can have a big impact on overall market performance. It’s also a reminder of how important the tech sector, and especially AI, has become in today’s economy.
Source: Bloomberg, UBS
US economy
The US economy has been slowing down lately. More people are out of work – unemployment has gone up by 0.7% since April 2023. Usually, when this happens, the stock market goes down. But that’s not what we’re seeing right now. It looks like investors are more excited about the possibility of lower interest rates than they are worried about companies potentially making less money.
During Covid, Americans saved a lot of money – about $2.1 trillion in total. This savings boost helped the economy for the past three years. But now, it seems these extra savings have been used up. This might mean people will try to save more and spend less, which could slow down the economy even more.
Australian economy
In Australia, prices are going up faster than expected. This is mostly because services, like rent, are getting more expensive (see chart 3). Over the last year, inflation went up by 4%, which is higher than the 2-3% that the Reserve Bank of Australia aims for. Because of this, there’s now a chance that interest rates might go up, which wasn’t expected a few months ago.
Australia’s economy hasn’t been growing much over the past year. In fact, when you look at it per person, it’s actually shrinking. More businesses are going bankrupt this year, and there are fewer job ads. All of this suggests that more people might lose their jobs in the coming year.
In short, both the US and Australian economies are facing some challenges. The US is slowing down but investors seem optimistic, while Australia is dealing with rising prices and signs of a weakening job market.
Source: ABS
Other major economies
China’s economy is growing steadily, even though its property market is still having problems. In May, the Chinese government announced a plan to help the housing market, however due to ongoing challenges, the Chinese housing market is likely to stay weak.
Europe’s economy grew a little bit in the first three months of the year, which means it’s no longer in a recession. The European Central Bank has lowered interest rates for the first time in a while, confident that inflation is under control now.
Looking ahead
Higher interest rates around the world have slowed global economic growth. In the US, fewer people have jobs now compared with a year ago, and the job market seems to be getting weaker. We think the US might have a mild recession by the end of this year. If this happens, stock markets might go down because right now, investors are expecting moderate growth.
However, there are a couple of ways things could turn out better. The effects of past interest rate increases might not slow down the US economy as much as expected. In addition, central banks might quickly lower interest rates, which could help growth in late 2024 and 2025.
Also, the US elections in late 2024 could affect investment markets.
Changes to investment options
We’re closing the Property and Infrastructure investment options on 4 October 2024. This is mainly because only a small number of members are using these options.
If you have money in these options:
We’ll send a letter with more details to anyone affected by this change.
Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
Issued by Vision Super Pty Ltd ABN 50 082 924 561 AFSL 225054. This information is general advice which does not take into account your personal financial objectives, situation or needs. Before making a decision about Vision Super, you should think about your financial requirements and consider the relevant Product Disclosure Statement and Target Market Determination at www.visionsuper.com.au
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