Global markets continued to ride the so-called “Trump rally” in February with health care and IT sectors providing much of the boost. But SuperRatings Chairman Jeff Bresnahan says super returns were subdued despite strong gains in local and global share markets in February.
“What we have seen so far in 2017 is some stability in superannuation returns following what was potentially a bit of hype at the end of 2016,” Bresnahan says. “Investors do not want to see markets getting too carried away, especially when there is still a fair amount of political and economic uncertainty globally.”
Chant West director, Warren Chant says growth funds have performed better than expected this financial year.
“With share markets up further so far in March (and) just over one quarter remaining, there is a good chance that they'll deliver an eighth consecutive positive financial year return,” Chant says.
“This is particularly impressive given the economic and political uncertainty that has been prevalent over the past few years.”
Mercer Growth returned 1.1% in February, on par with benchmark returns for the month, while returns for the first eight months of the 2016-17 financial year was a healthy 6.7%.
Meanwhile Mercer SmartPath 1969-73 – the largest SmartPath option by funds under management – returned 1.3% in February and 7.9% for the financial year to date.
Expectations for global economic growth remained high as President Trump continued to push his agenda of tax cuts, less regulation and higher domestic spending. The Dow Jones hit the historic 20,000 mark in late January and stayed high throughout February, opening at 21,000 on 1 March.
The US Federal Reserve lifted interest rates for the second time in three months at its March meeting, raising the target rate by 0.25% to a range of 0.75% to 1% last week. The Reserve Bank of Australia meanwhile held the cash rate at 1.5% to avoid putting pressure on housing prices by lowering rates and encouraging further borrowing.
The outlook for European economies looks stronger than it has for many years with the euro area forecast to grow at 1.6% in 2017 and 1.8% in 2018. But 2017 will be a busy political year with Germany, France and possibly Italy holding elections – it’s clear investors face heightened uncertainty in the months ahead.
China's economic growth continued to show signs of stabilising but Trump's protectionist policies, if enacted, have the potential to set off a trade war that could be damaging.