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Your super has done OK

Peter Switzer
19 November 2015

By Peter Switzer

There’s a really important six-week test that could say a lot about how our super funds end up for 2015. You know this has been a really drag of a year on someone like me who watches stocks and super for everyone with the second half being dominated by bad news.

Can’t remember the bad news? Well, you're the type of person I worry for, while the others like me who watch stocks daily I have to write for so they don’t get too stressed out.

The first half of the year was great with our index powering from a January low of around 5,200 to nearly hit 6,000 by May.  

And as the chart of S&P/ASX 200 index shows it’s been all downhill and you can blame, our economic and political troubles, Greece, China’s market meltdown as well as growth conerns and the Fed with its will we or won’t we raise rates this month?

However, despite all of this negative stuff super has done OK. Super watcher Warren Chant has summed it up this way:

“Following an up and down September quarter, super funds bounced back strongly in October with the median growth fund (61 to 80% growth assets) up 3.2% for the month,” he tells us. “This brought the return for the first ten months of the year to 6.1%, so with only six weeks of 2015 remaining there is a good chance that funds will deliver a fourth consecutive calendar year return.”

And if you want benchmark your fund here’s what you should be looking at:

  • While this year’s return won’t reach the heights of the past three years (12.8% in 2012, 17.2% in 2013 and 8.5% in 2014), it would still represent the sixth positive return in the past seven years and the eleventh in the past thirteen.  
  • A modest positive return for the year shouldn’t come as a surprise.  For some time, asset managers have been commenting that we’re heading into a lower return environment.  
  • Retail funds outperformed industry funds in October with a return of 3.5% versus 3%, which is unusual.

Given the performance of the stock market, which is only down a bit, super funds have done OK and if history delivers we could be in for a double-digit return year as December is a great month for stocks. But the big question will be how investors respond if the Fed raises interest rates on December 16? Right now there is a belief that instead of selling off with the first rate rise, Wall Street could actually spike on the idea that the Fed really believes in the US recovery.

That said, I worry if we get too excited in the run up to the decision and the stock market surges then we could get too far ahead of ourselves and a sell-off becomes logical after rates go up.

So for the next six weeks I want to see some really strong economic data from the USA and I hope we get it too because that will really reinforce the message that both economies are rebounding nicely. It’s more certain in the US case and it’s looking more possible here.

The first week of December brings our latest economic growth number and gee I hope it’sa beauty as the RBA expects!

We finished at 5,242.6 yesterday on the S&P/ASX 200 index and AMP’s Shane Oliver has tipped a 5,500 finish for the year while CMC Markets’ Michael McCarthy has gone for a nice 5,700!

A great economic story will be needed for that to happen but there is a pretty good chance that if you throw in dividends, being in the stock market could give you a 5% gain on Macca’s tip plus 5% for dividends, which would be a 10% return for 2016! It would be great for our super funds too.

Isn’t it strange how you often think things are worse than they really are? And that’s a message Canberra needs to start spreading because I’m getting tired of doing this virtually by myself! (Just joking, I’m not tired — this is what I do.)

If you liked this article you'll love the Switzer Report, our newsletter and website for trustees of self-managed super funds. Click here for a FREE trial and to hear more of Peter’s expert commentary and advice.

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