Quarterly investment update

Fund performance

Accumulation and Transition to Retirement

The Equip Super MySuper investment option returned 2.12% for the three months to 31 December 2024, and the Balanced Growth investment option returned 2.15%.

The MySuper investment option returned an average of 7.17% a year for members for the last 10 years, and the Balanced Growth investment option returned an average of 7.41% for the last 10 years.

Retirement Income

The Equip Super Balanced Growth Retirement Income investment option returned 2.37% for the three months to 31 December 2024.

The Balanced Growth Retirement Income investment option returned an average of 7.87% a year for members for the last 10 years. 

Global equity markets delivered mixed results in the December quarter. Developed markets gained 2% (MSCI World ex-Australia Index, hedged into AUD), boosted by a post-election rally in the US that balanced out weaker performance in October. However, market sentiment dipped in December after the US Federal Reserve indicated fewer rate cuts than previously expected.

US equities performed well, with the S&P 500 up 2.4% for the quarter, supported by strong business activity and economic resilience. In contrast, Chinese equities dropped 7% (MSCI China Index, local currency), as concerns over the property market, slowing economic growth, and US trade policies hurt confidence, despite new stimulus measures.

Australian shares slipped slightly, down 0.8% for the quarter. Materials was the weakest sector (-11.8%), followed by listed property (-6.1%). At both meetings of The Reserve Bank of Australia (RBA), interest rates were unchanged, citing inflation that remains below its target, which will influence future rate decisions.

Bonds also struggled, with Australian and global bonds down 0.3% and 1.2%, respectively. US bond yields rose sharply, climbing 79 basis points to 4.57%, while Australian 10-year yields increased by 39 basis points to 4.37%, reflecting stronger-than-expected economic data. Meanwhile, the Australian dollar fell to its lowest level since the pandemic, dropping from 69 US cents to below 62, driven by shifting expectations around relative interest rates and growth, which has led to a stronger US dollar.

As 2025 begins, investors are reflecting on a surprising 2024, where a predicted recession never materialised, AI stocks surged, and the US election passed quietly, contributing to a strong year for share markets. The key takeaway is that when expectations are low, markets can outperform. Investors now face the task of adjusting strategies based on new forecasts.

For 2025, economic growth is expected to remain steady, with corporate earnings likely to stay robust and expand beyond last year’s major winners. Inflation may stay slightly elevated but not enough to prevent one or two rate cuts by the US Federal Reserve, creating what some consider a “Goldilocks” scenario. However, optimism is already reflected in high share market valuations, which may prompt caution among contrarian investors.

Risks to this positive outlook include potential policy changes under Donald Trump, particularly regarding tariffs and trade, which could disrupt markets. Inflation remains a concern, and recent increases in bond yields reflect a strong growth and inflation environment. While not expected, a shift in the Fed’s approach toward raising rates could lead to significant market volatility.

China’s policy direction is also a critical factor. Although stimulus measures have been announced, details remain unclear, and geopolitical risks will continue to require close attention. Investors should remain mindful of these uncertainties while navigating the year ahead.