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Hello everybody my name is Brian Parker I’m the Chief Economist at Australian retirement trust.
Since the worst of the COVID financial crisis in March 2020 up until the end of 2021 we've seen very strong investment returns particularly from share markets both here in Australia and globally. In fact, we've seen very strong returns for over decade leading up to the end of 2021.
But 2022 to date has been far more challenging. Share market conditions remain very volatile. While the war in Ukraine continues, markets are now largely focused on inflation, interest rates and the risk of a significant downturn in the world economy. In short, markets are worried that central banks may overdo it – raising rates too far and causing a recession rather than delivering some kind of ‘soft landing’.
We know that many of our members – particularly those members approaching or in retirement – are worried about their investments in this environment. With that in mind, let me share with you some key messages to keep in mind when you’re thinking about what, if anything, to do with your superannuation.
Firstly, it's important to remember that superannuation is the longest-term investment that many of us will ever have and Australian Retirement Trust’s diversified options have delivered very strong long-term returns. And because superannuation is a long-term investment, we do not manage portfolios on the basis of our own or anybody else’s short-term economic or market forecasts.
Further interest rate increases from the world’s central banks (including our own RBA) are inevitable, but we have no way of knowing with any certainty just how far rates will need to rise in order to slow demand and bring inflation down.
While much of the rise in inflation we have seen over the past year or so is likely to fade, for example, as supply chain pressures ease and key commodity prices stabilise or decline - this is likely to take some time and over the medium to longer-term inflation is likely to be somewhat higher than we saw in the pre-COVID years.
Nor can we predict when geopolitical events may emerge as issues for financial markets and nor can we predict how they will play out. The war in Ukraine is a case in point. Even well-regarded geopolitical and military experts have no idea how the war in Ukraine evolves from here.
Crises, recessions, market downturns, are near impossible to predict in advance, but they are inevitable.
For someone in their late teens or early 20s, starting their first full-time job, they will likely experience maybe five, six or seven major market downturns over their working life.
But every crisis every recession every downturn comes to an end - bar none. There is always a light at the end of the tunnel and that light is not a train it's the end of the tunnel!
What we also know is that periods of market volatility where share prices fall significantly also provide opportunity, the opportunity to buy assets at much more attractive prices. That is what we pay our investment managers to do on your behalf. That’s also what the investment team at Australian Retirement Trust is paid to do, and that is exactly what we're doing in this environment.
And we also know that the long-term reward for tolerating periods of short-term volatility where share prices can fall sharply, is higher long-term returns. Ultimately investors are rewarded for risk -that’s how markets work over the long term.
However, we also know that all our members are different. Our members are at different stages of life. They have different appetites for risk. They have different long-term investment goals. They all have different plans for retirement. For those of our members approaching or in retirement who are invested in either of Australian Retirement Trust’s default options, your exposure to the volatility of share markets has already been reduced – because we don’t want your retirement plans derailed by sharp falls in share markets.
For any of our members who are concerned about what’s happening in markets or who want to make sure that the Australian retirement Trust investment option that you have is right for you, please contact us. For members with QSuper accounts please call us on 1300 360 750. For Australian Retirement Trust Super Savings members please call us on 13 11 84. We are here to help.