Investment update – January 2024 market review

31 January, 2024 | 5 minute read

Central banks in the developed world continued increasing interest rates in 2023 as inflation remained higher than its targeted level. Despite this, global equity markets experienced strong gains. This was favourable for most of Vision Super’s investment options where returns were generally strong. Vision Super’s Balanced growth option returned 11.71% in 2023.


From a financial market perspective, the impact of Covid-19 is largely in the rear-view mirror. In May 2023, the World Health Organisation announced that Covid-19 is no longer considered a public health emergency. With a large proportion of the population vaccinated, the number of deaths has decreased significantly from early in the pandemic and Covid restrictions have been lifted globally.


Inflation in US and Australia fell from its peak level achieved in 2022 as supply-chains recovered and consumer demand eased. Our indicators suggest that US inflation will continue its downward trend and be consistent with the Fed’s 2% target in the first half of this year.

Interest rates

The US Federal Reserve and the Reserve Bank of Australia rapidly increased interest rates over the last two years. Markets are pricing the current interest rate of 5.25 to 5.5% in the US and 4.35% in Australia as the respective peak levels and are expecting moderate rate cuts later this year. However, if inflation remains higher than expected, interest rates are likely to stay higher for longer. On the other hand, if inflation sharply falls below the target and/or economic growth materially deteriorates, interest rates are likely to fall substantially.

Geopolitical risks

A key downside risk for financial markets is a material increase in geopolitical instability. If the Israel-Hamas conflict broadens to the wider region, it could significantly disrupt global oil supply and aggravate supply-side price pressures. In the US, there are concerns of deepening domestic political polarisation. As such, the US election in November this year may result in heightened volatility in financial markets. Other geopolitical risks include an intensification of the Russia-Ukraine war or increased turmoil between China and Taiwan.


Equity and bond markets experienced robust gains in the final months of 2023 as they factored in expectations of a soft landing. The decline in US core inflation throughout 2023 has also been an important positive for financial markets. However, we expect the lagged impact of tight monetary policy to dampen demand and lead to an increase in unemployment. Our base case is now a US recession commencing in 2024.

In Australia, house prices have continued to rise, with the unemployment rate near a record low. Although the Australian economy has generally performed well recently, job advertisements suggest a material slowdown in employment growth over the next six months that may result in the RBA cutting interest rates. The risk of Australia entering a recession over the next 12 to 18 months is elevated.

We maintain a cautious stance on the medium-term investment outlook. Reflecting this, our multi-asset class investment options are underweight growth assets such as equities and more constructive on defensive assets like bonds. We expect the equity market to fall this year, with global equity markets troughing before a US recession ends. Accordingly, we anticipate that there is likely to be a favourable opportunity to move to an overweight growth exposure in 2024. The main upside risk to our central case is that the US economy does not experience a recession this year and there is no material correction in equities. Conversely, the lagged economic impact of the interest rate increases so far may be greater than we expect. We continue to monitor developments closely.


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.

5 February, 2024 | 5 minute read

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