Investment update – January

February 10 |

Despite the ongoing Covid-19 pandemic, global equity markets generally experienced strong gains last year. With the exception of the Diversified bonds and Cash options, returns for Vision Super’s investment options for 2021 were generally strong. The MySuper default Balanced growth option returned 14.78%.


One of the key developments in 2021 was the progressive roll out of the Covid-19 vaccines. While they took time to manufacture, distribute and use, the vaccines meant the world could move progressively to open up. This provided a material boost to equity markets.
In the middle of the year, the Delta variant emerged, which resulted in softer activity for a short period. While this variant was more infectious, the economic and market impact was less than the initial Covid-19 wave.

In Australia, the impact of Covid-19 was generally less than other developed countries as we were able to limit entry and transmission of the virus to a greater extent. That said, the Delta outbreak in the latter half of the year in NSW and Victoria resulted in a protracted lockdown in these states.
US politics

Another key aspect of 2021 was the US Democrats having presidential power and power in both houses of Congress. This provided the platform to remove US political gridlock and allowed exceptionally large US fiscal stimulus packages to be approved.

Rising US inflation

By the second quarter of 2021, US inflation began to surprise on the upside versus consensus expectations, reflecting factors such as strong demand for goods and supply constraints (eg shipping). The US Federal Reserve (the Fed) initially indicated that it was not concerned as it believed that higher inflation was transitory. However, by the end of the year, the Fed had become more concerned and signalled that it is likely to raise interest rates in 2022.


While US core inflation has risen to the highest level of several decades, recent Australian inflation has been materially lower than US inflation. This has allowed the Reserve Bank of Australia (RBA) to maintain very stimulatory policy throughout 2021. The RBA has also communicated that it does not expect to raise the official cash rate soon although we expect an increase this year. RBA policy helped underpin very rapid house price growth in 2021, with the CoreLogic Capital City Dwelling Prices (8-city) increasing by 21.0% over the year to December 2021.


The global economic recovery is expected to continue in 2022. At the time of writing, the Omicron variant of COVID-19 is spreading quickly. We expect that this will have a material short-term impact on global activity but will not derail the recovery. While this variant has a much higher transmission rate than the Delta variant, it is less severe. Reflecting this, we anticipate that global activity will weaken in the first few months of the year and then improve progressively once virus case numbers peak. We also expect that Omicron will increase immunity to Covid-19 as it is likely to infect a materially higher proportion of the population than other variants. A key downside risk is that the virus mutates into a severe disease that is highly transmissible, with vaccines less effective against it.

Along with Covid-19 developments, the US inflation path is likely to be important for investment markets. We expect that it will remain higher than the Fed’s 2% target for longer than the consensus expects and be a headwind for equity markets. The downside risk to our central case is that the Fed needs to raise interest rates more than we expect, resulting in weak growth in 2023. Conversely, lower than expected US inflation would likely provide a boost to equity markets.

We anticipate that returns will be lower over the medium-term versus recent years, as valuations are elevated. In addition, potential growth is declining as a result of high debt levels and deteriorating demographics.




Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.

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 issued by Vision Super Pty Ltd ABN 50 082 924 561 AFSL 225054 at

February 10 |  

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