Q2 2023 investment market performance with a look into 2024
Overview
- Equities and bonds performed strongly in Q2 2023, with a large rally in the final two months of the year. It was a strong year in 2023 generally.
- Economic resiliency continues, with the Reserve Bank hinting at interest rate cuts following lower-than-expected inflation. Similar trends can be seen in the U.S and other developed markets.
- Bonds performed strongly in the last quarter due to falling interest rate expectations. Corporate bonds performed especially well.
- Commodities and commercial real estate underperformed compared to other asset classes.
Asses class recap for December quarter 2023
Global shares
In the global arena, shares had a fantastic run. The MSCI World Ex-Australia NR Index reported a strong 9.9% return in the quarter, translating to a 23.32% return for the year. Sectors such as Information Technology and Industrials led the pack with double-digit growth.
Australian shares
On home turf, Australian shares didn't disappoint either. The S&P/ASX200 accumulation index clocked in at 8.4%, with sectors like healthcare and Materials showing strong performance.
Bonds
Bonds also had their moment in the sun, with corporate bonds stealing the spotlight. This success was largely due to falling interest rate expectations.
Global Property & Infrastructure
Domestic listed property & global listed property and global infrastructure had strong positive results in the quarter alongside global equities.
Key stats (in AUD hedged terms, December 30, 2023): Australian listed property: +16.5%, Global listed property -17.6% over the quarter, Global listed infrastructure: 7.8% over the quarter.
Currencies
The U.S. dollar depreciated against some major currencies, with the Australian dollar finishing the quarter at 68 US cents, up from 64 US cents at the start of quarter. This was a helpful tailwind to REI’s equity returns, which are substantially tied to the Aussie dollar.
Unlisted Assets
Unlisted property in Australia suffered during the quarter, dropping over 3%, as revaluing of commercial offices in the post-COVID era continued. Healthcare property values also cooled 5% after a strong 3-year run of performance.
Unlisted Infrastructure fared better, delivering 1.5% for the quarter. New private credit investments have started strongly in their first month, growing 0.79% in December.
Changes to the Balanced Portfolio over the December quarter
- Strategically reinvested equities or stocks after their prices had fallen, using money from our income-producing assets.
- We added more US Utilities to our portfolio. This is to balance our investments in US Equities and also to manage the risk related to the valuation of different sectors.
- We sold our investments in US Communication Services ETF to lock in our profits. Then, we put these profits into Utilities and Health Care sectors, which we believe have good prospects.
- We increased our investments in US Health Care. This is part of our strategy to redirect profits into sectors that we believe are undervalued and have lesser risk (lower beta assets).
- We rebalanced the portfolio by taking profits from US Financials and bolstering our investments in Australian Banks. This helps us manage risk while keeping a slightly lower investment in strategic asset allocation.
- We took profits in fixed-income investments as interest rates fell and put these proceeds into cash. This slightly reduced our overweight position from the strategic asset allocation. This is a step to ensure our portfolio is well-balanced and diversified.
All these steps are taken with the aim of growing your investments over time.
Looking Ahead
As we step into 2024, it's important to remember that uncertainty isn't synonymous with a lack of opportunities. In fact, we see potential in defensive equities like healthcare, U.S. banks, Chinese technology stocks, emerging-market debt, and government bonds. While it's impossible to predict with certainty, the path of interest rates and inflation will continue to be key topics among investors. It's worth remembering that even though investors went into 2023 worried about inflation and a potential recession, these fears didn't materialise. Now in 2024, investors are expecting low inflation, no recession, and significant interest rate cuts.
Remember, investing is a long-term strategy and risk management is key. Here at REI Super, your financial future is our top priority. We're committed to creating the best possible retirement outcomes for you.
Are You on the Right Investment Track?
Understanding your risk tolerance is crucial in planning your investment strategy and achieving your financial goals.
- Take our risk profile quiz to assess what level of risk you're comfortable with.
- Use our simple-to-use online tool to estimate how much money you may have, how long it may last and how much you may need in retirement.
Need Advice?
If you need help choosing the right investments, our member services helpline is here for you. As an REI Super member, you can access contributions, investments, and insurance advice. We also offer competitive fixed fees for retirement strategies and comprehensive advice. Call us today on 1300 13 44 33.
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Future investment performance can vary from past performance, and you should not base your decision to invest in REI Super simply on past performance. Past earning rates are not an indicator of future earning rates. The investment returns of REI Super are not guaranteed, and the value of the investment may rise or fall.
The information contained in this article does not constitute financial product advice. REI Super does not give any warranty to the accuracy, completeness or currency of the information provided. Although REI Super makes every reasonable effort to maintain current and accurate information, you should be aware that there is still the possibility of inadvertent errors and technical inaccuracies. REI Superannuation Fund Pty Ltd ABN 68 056 044 770, AFSL 240569, RSE L0000314 Trustee of REI Super (ABN 76 641 658 449), SPIN REI0001AU, RSE R1000412. MySuper unique identifier 76641658449129