2020 continues its bumpy ride, but we’re here to help walk you through it.
You may have noticed that some of your investment options have changed recently - like Core Pool, which we’ve renamed Balanced Growth.
We made these changes on 1 October 2020 to support HESTA members well into the future.
Our Ready-Made investment options have seen solid returns in the first quarter of the new financial year with our MySuper Balanced Growth option (formerly Core Pool) returning 1.84%.
Global equities bounce back
Stock markets around the world are making a strong comeback from their March lows.
“We see three main reasons for the rise in stock markets: investors are feeling encouraged by the substantial size of monetary and fiscal stimulus, the ongoing improvement in economic and financial data and the expectations of an extended low interest rate environment,” says HESTA Chief Investment Officer Sonya Sawtell-Rickson.
The continued impact of coronavirus
In our July investment update we warned that the impact of coronavirus on financial markets still had a long way to play out, and that continues to be the case.
“COVID-19 cases are seeing a ‘second wave’ increase in Western Europe and the UK, leading to the re-introduction of certain restrictions. Additionally, cases in the US and emerging markets remain elevated with fears that the northern winter could see a spike in infections,” says Sonya.
“In the United States, the political climate has become more contentious with the upcoming election, and the Congress failing to pass an additional stimulus bill, adding to near term uncertainty.
“In Australia, the backdrop is more encouraging. With daily COVID-19 cases dropping in Victoria, there is a clearer path to opening the region that makes up almost 25% of the Australian economy,” says Sonya.
What the road ahead looks like
The policy environment in Australia has been very supportive. “There is speculation in the investment community that the Reserve Bank of Australia (RBA) could do additional easing later this year and the Federal Government's October budget included plans to bring forward legislated tax cuts, to provide help to workers and small business, and increase infrastructure spending which will help drive growth.
“Despite some of the uncertainty over the shorter-term, we still believe that we are heading for a ‘U-shape’ recovery – a gradual growth recovery which will be positive for financial markets,” says Sonya.
“Even as this recovery evolves, central banks are expected to stay committed to low interest rates, resulting in low cash returns, and inflation is also forecast to remain low given the level of unemployment and spare capacity in the economy.
“In this environment, we are hopeful our investment options are on track to achieve the stated returns over their investment horizon.”