Investment update with Daniel Selioutine, Q1 2024-25

In our first edition of Exploring Super for 2025, Daniel Selioutine (Group Executive, Investments) provides economic and market commentary for the July to September 2024 period.

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This podcast is of a general nature only and does not consider your personal circumstances, financial needs or objectives. Before acting on any advice contained in this podcast, please download and read the relevant Product Disclosure Statement and target market determination, found on our website: esssuper.com.au, The Board recommends that you seek financial advice before acting upon this information. Investment returns cannot be guaranteed as investment markets can be volatile. As a consequence, returns can be positive or negative. Past investment performance is not a reliable indicator of future performance. Benefits in ESSSuper's Accumulation Plan, Income Streams and Beneficiary Account products are not guaranteed or underwritten by the Victorian Government or ESSSuper. Any institutions mentioned by name does not constitute endorsement. 

 SuperRatings is a third-party  superannuation research company providing data analysis, information and commentary to both the public and the superannuation industry. Refer to superratings.com.au for more information.

Transcript

Transcript

00:00:02

You're listening to Exploring Super, the exclusive podcast for ESS Super members.

00:00:10

Welcome to Exploring Super, the exclusive podcast for ESS Super members.

00:00:15

My name's Christian Kueng and I'm the Manager of Member Education.

00:00:18

And I'm Michelle Guinan.

00:00:19

I'm the Stakeholder Relationship Manager.

00:00:21

And we're joined today by Daniel Sellioutine

00:00:24

Group Executive Investments.

00:00:26

He's here to provide an economic and market commentary for the July to September 2024 period, plus some more up-to-date commentary in our latest edition of Exploring Super.

00:00:36

Thank you for joining us today, Daniel.

00:00:38

Glad to be here.

00:00:39

Excellent.

00:00:40

So what have been some of the key movements we've seen in the investment markets for the first quarter of 24-25?

00:00:46

In the September quarter, equity markets continued to perform well.

00:00:51

and that followed a strong overall performance in the 2023-24 financial year.

00:00:58

Australian equities, which had lagged behind global markets the previous year, started this financial year on a positive note and outperformed during the quarter.

00:01:08

In mid-September, on the 18th of September to be precise, the US Federal Reserve announced a half a percent interest rate cut, and that's its first interest rate cut in four years.

00:01:21

And that led to a drop in bond yields, which is to say that bond prices increased over the September quarter.

00:01:30

Much of that price action actually reversed in October, and we're seeing a lot of...

00:01:35

affect as the market really adjusts its expectations for what is commonly referred to as a soft landing in the US economy.

00:01:45

Stronger than expected US jobs reports helped ease some of those potential recession concerns, but inflation remains a key challenge in several countries.

00:01:57

In the US, inflation recently dropped below 3%, but it's still elevated, and it's been at this level since about June.

00:02:04

2023.

00:02:06

In Australia, inflation fell slightly below the Reserve Bank's 2 to 3% target band.

00:02:14

And that hasn't been at this level since about March 2021.

00:02:20

That being said, the Reserve Bank, our Reserve Bank has cautioned the market that some of this drop may be temporary and they're actually expecting inflation to

00:02:32

to go up before it goes back down.

00:02:34

Overall, the economic environment remains uncertain for some risk assets, notwithstanding US equity markets in particular are outperforming exceptionally strongly and they now appear to be rather expensive on many valuation measures.

00:02:52

So how did the US election and other geopolitical events affect some of the investment markets?

00:02:58

So far, the US equity market has generally reacted positively to Trump's victory in the US presidential elections.

00:03:08

In his first term president, Trump implemented corporate tax cuts, which led to a rally.

00:03:15

in equity markets at the time.

00:03:17

However, it is worth noting that the market rallied at that point in time a couple of years ago for much lower valuations compared to where we are today.

00:03:27

That said, I don't think investors can predict Trump's future policy intentions with any real accuracy.

00:03:34

So our approach here at ESS is more about ensuring that we're not overexposed to any one thematic.

00:03:42

We try not to deviate too far

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from benchmark when there isn't a strong economic rationale for doing so.

00:03:51

Thanks, Daniel.

00:03:52

So how have you actually seen this translate to our funds investments?

00:03:55

Well, investment performance against the inflation consumer price index target objectives was positive over the year ending September.

00:04:05

Every option outperformed its CPI goal.

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However, when compared to peers, our performance was below the median.

00:04:14

for six out of nine options over that same time period.

00:04:17

This is because we've intentionally reduced risk across most of our options as equity market valuations have become increasingly stretched.

00:04:27

So over the past year, there's been a rally in US technology stocks, which helped the options that were more heavily invested in passive equities.

00:04:36

So for example, our balanced growth option, which is a lower cost

00:04:41

more volatile offering outperformed the median super ratings balanced fund because it's entirely invested in passive equities.

00:04:49

Most of our active equity managers didn't chase the market rally, which meant that the professional fund managers who are selecting stocks for the accumulation plan are cautious about pursuing the passive benchmark into extended valuations.

00:05:05

We believe

00:05:07

There's something worth noting in that.

00:05:10

Looking at our three-year numbers to September, we're still in a strong position compared to peer funds.

00:05:16

Seven of nine of our options have delivered returns in the top 25% of their respective super ratings.

00:05:24

peers over that period to September.

00:05:27

So that's top quartile performance.

00:05:29

Excellent.

00:05:30

Thanks very much for coming in today, Daniel, and sharing your insights, and we look forward to having you on again.

00:05:35

Thanks very much for having me.

00:05:36

That wraps up our episode today of Exploring Super, the exclusive podcast for ESS Super members.

00:05:43

We look forward to producing more content for you at ESS Super, proudly serving our members.

00:05:48

If you'd like more information about our investments and products, please go to essuper.com.

00:05:57

This podcast is of a general nature only and does not consider your personal circumstances, financial needs or objectives.

00:06:04

Before acting on any advice contained in this podcast, please download and read the relevant product disclosure statement and target market determination, found on our website, esssuper.com.au.

00:06:15

The board recommends that you seek financial advice before acting upon this information.

00:06:19

Investment returns cannot be guaranteed as investment markets can be volatile.

00:06:23

As A consequence, returns can be positive or negative.

00:06:27

Past investment performance is not a reliable indicator of future performance.

00:06:31

Benefits in ESS Super's accumulation plan, income streams and beneficiary account products are not guaranteed or underwritten by the Victorian Government or ESS Super.

00:06:41

Any institutions mentioned by name does not constitute endorsement.

00:06:45

Superratings is a third-party superannuation research company providing data analysis, information and commentary to both the public and the superannuation industry.

00:06:54

Refer to superratings.com.au for more information.