The March quarter witnessed the continuing market rally that has lifted many share markets around the world to the new record highs.
The month of March also marked one year since the uncertainty of the COVID-19 pandemic led to a large-scale market selloff, resulting in a fall in asset prices across the globe. From a financial market perspective, we now look back at what has been a “V” shaped recovery over one year.
Over the course of the current financial year, 1 July 2020 to 31 March 2021, here’s how HESTA’s investment options have performed.
HESTA investment option returns1
Balanced Growth option
Sustainable Growth option
Whilst market performance overall has been strong, the March quarter reminded us about the volatility of markets in the short term. This provided another good reminder about the importance of maintaining a long-term focus on investment strategy.
Global equity markets went through a seesaw of emotion through the March quarter. The NASDAQ (where lots of technology companies are listed, such as Apple, Microsoft and Tesla) set a new record in February, only to fall by 10% by early March. However, equity markets across the board were then buoyed again when Joe Biden’s $1.9T stimulus package was voted into law, giving markets much reason for optimism.
Fixed income assets also went a on volatile ride as concerns about inflation risk grew. The likelihood of increasing inflation looms as a possibility following a long period of government stimulus and low interest rate fiscal policy. As concern about rising inflation grew, it drove up bond yields and turned short-term returns negative. However, the volatility did begin to stabilise across fixed income assets as the March quarter approached its end.
The rollout of the COVID-19 vaccine continues to stoke optimism across financial markets as restriction-bound economies move closer to re-opening.
The world has kept a close watch on the vaccine rollout and many countries have continued gradually navigating through nation-wide vaccine programs. Despite hurdles along the way, vaccine doses administered globally continue an encouraging climb.
Interest rates were maintained at record lows by central banks around the world, including the Reserve Bank of Australia and the United States’ Federal Reserve. Interest rates are adjusted to create healthy and sustainable economic development. The current low-interest rate strategy aims to reduce rates for borrowers and encourage lending to businesses. In theory, this should continue to help the global economy recover strongly. The Reserve Bank of Australia (RBA) has affirmed that cash rates will remain low for as long as necessary. The RBA has noted that conditions that warrant an increased interest rate are not anticipated until 2024.
1 Past performance is not a reliable indicator of future performance. Investments may go up or down. The returns shown are net of investments fees, indirect costs and taxes.