7 August 2024
GuildSuper delivered strong returns for the 2023/2024 financial year, with the Growing Lifestage option one in the top 10 best performing super options in its category*.
Here’s everything you need to know about how the economy and share markets impacted your super.
The big picture
Globally, share markets trended upwards. In the US, the S&P 500 and Nasdaq reached new all-time highs this quarter. This growth has been driven predominantly by rapid expansion in the technology and communication sectors. The excitement surrounding artificial intelligence (AI) is a major factor fueling this surge. Investors are clearly optimistic about the future potential of AI, leading to a significant rise in the value of AI-focused companies.
Nvidia, an investment of ours, exemplifies this trend with an extraordinary 191% return over the year. Nvidia's expertise in AI spans developing programming languages, software, and hardware. Similarly, Arista Networks, a data centre company, has reaped the benefits of the AI boom, delivering impressive 115% returns over the same period. In addition, Disco Corp, a Japanese firm known for manufacturing ultra-thin microchips, has posted remarkable returns of 143%, further cementing the success stories within the tech sector.
The Australian story
Locally, Australian shares lagged, weighed down by performance across energy and materials sectors during the quarter. Australian property has also pulled back, with investors possibly spooked by the prospect of future interest rate hikes as we saw some indicators inflation was not easing.
Our investment team anticipated these market movements and wisely held back on investing in certain alternative assets, including those in the healthcare sector, predicting a potential drop in valuations. This insight turned out to be spot on. The timing of capital deployment is crucial to securing the best deals for our members.
Australian consumers carry some of the highest levels of debt globally. Consequently, we feel the impact of interest rate changes more acutely than consumers in other countries. This exposes Australia to significant economic risks if interest rates continue to climb.
Currently, the trajectory of interest rates in Australia suggests that rate cuts may not arrive as quickly as some had hoped. The Reserve Bank faces a complex challenge in balancing the need to address inflation concerns while managing the potential repercussions on consumer spending and economic growth.
Looking forward
We’ve certainly benefited from investing in the US tech sector over the year. But a substantial portion of this growth is coming from just a handful of tech giants, including the group sometimes called the Magnificent 7 - Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.
The fact that the market’s gains are so concentrated could be an indicator of fragility. There are also potential geopolitical risks looming, such as the US election and international conflicts. Given that share markets are close to all-time highs, our investment team is closely monitoring market indicators to assess the balance between potential upside and the risk of a pullback.
That’s why even though tech stocks have been a driver of success, we remain focused on diversification across asset classes to provide dampened volatility for members. Diversification means that your super is invested across a range of different assets – so not just shares traded on the stock market, but also bonds, cash, property and more.
Investment performance
Despite a challenging quarter, returns over the financial year to date have been strong. Our MySuper Building stage returned 13.18% over the period, MySuper Growing returned 11.61% and MySuper Consolidating delivered 8.99%.
Returns are not guaranteed and past performance is not a reliable indicator of future performance.
*Growing Lifestage option was in the top 10 for MySuper Lifecycle products, more info here. Please note that GuildSuper MySuper – Growing Lifestage is the same investment product as the Child Care Super MySuper – Growing Lifestage.