• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

SuperGuide

Superannuation and retirement planning information

  • SuperGuide Premium
  • Account
  • Log In
  • SuperGuide Premium
  • Account
  • Log In
  • How super works
    • Super for beginners
    • Super rules
    • Employers guide to super
    • Super contributions
    • Super and tax
    • Accessing super
    • Super news
    • Women and super
    • Super tips and strategies
    • How-to guides
    • Super quizzes
    • Superannuation Q&As
    • Superannuation glossary
  • Super funds
    • Best performing super funds
    • Super fund rankings
    • Best performing pension funds
    • Pension fund rankings
    • Super fund average returns
    • Super investing strategies
    • Comparing super funds
    • Choosing a super fund
    • Choosing an investment option
    • Super fund fees
    • Insurance and super
    • Super fund profiles
  • SMSFs
    • SMSFs for beginners
    • SMSF administration
    • SMSF checklists
    • SMSF compliance
    • SMSF investing
    • SMSF pensions
    • SMSF strategies
    • SMSF Q&As
  • Plan your retirement
    • Retirement planning for beginners
    • When should I retire?
    • How long will I live?
    • How much super do I need?
    • Will I get the Age Pension?
    • How much will I spend in retirement?
    • Financial advice
    • Retiring overseas
    • Preparing for retirement
    • Retirement planning strategies
    • Retirement calculators and reckoners
  • In retirement
    • Income in retirement
    • Super lump sums
    • Super pensions
    • Age Pension
    • Working in retirement
    • Life in retirement
    • Senior concessions and services
    • Aged care
    • Estate planning
    • Super death benefits

Home / SMSFs / SMSF investing / 2019/20 Year in Review

2019/20 Year in Review

July 2, 2020 by Barbara Drury Leave a Comment

Reading time: 5 minutes

On this page

  • Global economic fallout
  • Interest rates lower for longer
  • A resilient Aussie dollar
  • Falling commodity prices
  • Shares hit the panic button
  • Solid returns from residential property
  • Looking ahead

To say 2019/20 was challenging for investors is putting it mildly. From the US-China trade wars and Brexit, to Australia’s catastrophic summer bushfires and the global COVID-19 pandemic, the seismic shocks just kept coming.

As we look back over the year that was, many challenges remain unresolved but the fallout, for Australian investors at least, is not as bad as many predicted. After the plunge in global sharemarkets at the height of the COVID panic in March, diversified superannuation funds look set to finish the year close to where they began. 

According to Chant West, the median growth fund, which typically holds 61–80% in shares and other growth assets, was down just 1.1% in the year to May and is on track to finish the year line ball with where it began.

The table below shows the annual price returns for major markets and assets.

Table 1: Financial year returns to 30 June 2020

Shares
MSCI World IndexUnchanged
S&P500+4.6%
ASX200-10.9%
Bond yields
US 10-year bond-1.38%
Aust 10-year bond-0.43%
Currency
$A vs $US-0.8%
Commodities
Iron ore-14.4%
Oil-32.6%
Gold+28.7%
Australian residential property
CoreLogic Home Value Index-6.9%

Global economic fallout

In its June 2020 update, with the world facing the worst recession since the 1930s, the International Monetary Fund (IMF) labelled the economic fallout from COVID-19 “a crisis like no other”.

The IMF forecasts global growth to fall 4.9% in 2020 before recovering 5.4% in 2021. China’s growth has plunged from 6.1% in 2019 to a forecast 1% this year and 8.2% in 2021. The US is forecast to fall 8% this year before rebounding 4.5% in 2021.


Advertisement
SuperGuide Premium is ad-free

While Australia has avoided the worst of COVID, we are not immune.

After 28 years of economic expansion, our economy contracted 0.3% in the March quarter and an estimated 8% in the June quarter. Two quarters of negative growth denote recession. The IMF forecasts Australia’s economy will contract 4.5% in 2020 before growing 5.4% in 2021.

After being briefly in balance in 2019, Australia’s budget deficit blew out to a record $65.5 billion in the 12 months to May. It is estimated that federal, state and territory governments have committed $295 billion in stimulus and support payments to help individuals and businesses weather the COVID storm. And it seems to be working. Australia’s unemployment rate is around 7.1%, well below earlier estimates.

Interest rates lower for longer

It now appears that record low interest rates are going to be with us for the foreseeable future.

The Reserve Bank of Australia (RBA) cut interest rates to the bone in 2019/20. Four cuts of 25 basis points took the cash rate to an historic low of 0.25% where it is likely to stay until employment picks up. Unemployment is not expected to recover to pre-COVID levels for at least two years.

Australia Cash Rate Target

Source: RBA

Compare super funds

Read more...

Advertisement

The RBA has also set a target of 25 basis points for the three-year government bond yield, while the ten-year bond yield has dropped below 1%. That’s small reward for holding bonds for ten years and an indication that the market expects rates to mark time for a long time.

Low rates are a blow for retirees and anyone reliant on income from their investments. The best 12-month term deposit rates are around 1%, well below inflation of 2.2%. In other words, by putting your cash in the bank you are going backwards.

A resilient Aussie dollar

The Aussie dollar finished the year around US69c, close to where it started. But it was a wild journey along the way. After reaching a high of US70.8c in July 2019 it plunged to a 17-year low of US55.1c in March as the COVID-related panic on global financial markets reached its peak.

AUD/USD exchange rate

Sources: WM/Reuters

The rebound in the Aussie dollar in the June quarter was partly in recognition of Australia’s sure handling of the health crisis and its fiscal response compared with most other nations. However, a high dollar is not helpful for Australian exporters, already suffering from weak global demand.

Falling commodity prices

As the world slides into recession and economic activity falls, demand for commodities has also weakened overall.

Advertisement

Iron ore prices fell 14% in the year to June, while oil prices fell almost 33% due to a supply glut. The price of petrol fell below $1 a litre briefly, in a rare bright spot for Australian motorists even if they couldn’t go anywhere due to the COVID shutdowns.

One commodity bucking the trend was gold. Thanks to its traditional role as a safe-haven investment, gold prices rose almost 29% to US$1,781.60 an ounce over the year.

Shares hit the panic button

After ignoring signs of economic weakness all around them, Australian shares followed global sharemarkets to record highs in February only to come crashing back to earth in February. The ASX 200 fell 36% from peak to trough in a textbook display of the excesses of fear and greed that shares are known for.

As it became clear that Australia had managed to contain the spread of COVID-19 and the government rolled out its support packages, shares staged a partial recovery to finish the year down 10.9%. This was the worst performance from the ASX 200 in eight years, but some sectors flourished while others were flattened by the virus.

Share Price Accumulation Indices

Log scale, end December 1994 = 100

Sources: RBA, Refinitiv


Advertisement

Consumer durables (up 39%), pharmaceuticals and biotech (up 31%), retail (up 19%), software and services (up 18%) and food (up 16%) all outperformed. Banks (down 28%), insurance (down 26%), energy (down 31%) and capital goods (down 27%) were worst affected as consumers and businesses stopped spending and natural disasters took their toll.

Total returns from Australian shares (prices plus dividends, as measured by the ASX 200 Accumulation Index – see graph above) fell by 7.2%, the first annual fall in eight years.

Global shares were similarly mixed. The big winner from the COVID shutdowns was Big Tech, as the world retreated to their homes and their screens, buying, studying, meeting and working online. The US NASDAQ index – home to technology heavyweights such as Google, Apple, Netflix, Facebook, Amazon and Zoom – rose 26%. 

Solid returns from residential property

Australia’s residential property market held up well in 2019/20, outperforming shares. The total return from residential property (prices and rents) on a national basis was 11.7%. This compares with a 7.2% fall in total returns from shares.

While the suspension of open houses and auctions halted the market recovery, only Perth and Darwin experienced annual price falls as the table below shows. The two biggest markets – Sydney and Melbourne – posted double digit annual returns.

Table 2: Residential housing values as at 30 June 2020

MonthQuarterAnnualTotal returnMedian value
Sydney-0.8%-0.8%13.3%16.7%$875,749
Melbourne-1.1%-2.3%10.2%13.8%$683,529
Brisbane-0.4%-0.2%4.4%8.4%$503,148
Adelaide-0.2%0.7%2.0%6.5%$440,267
Perth-1.1%-1.4%-2.5%1.6%$441,977
Hobart0.3%1.0%6.4%11.9%$487,727
Darwin0.3%0.4%-1.5%5.7%$387,914
Canberra0.1%0.7%6.3%11.2%$639,965
Combined capitals-0.8%-1.1%8.9%12.5%$641,671
Combined regional-0.2%0.3%3.7%8.5%$394,570
National-0.7%-0.8%7.8%11.7%$554,741

Source: CoreLogic Home Value Index

Looking ahead

We are not out of the COVID woods yet, as it will take some time before the virus is contained and, hopefully, a vaccine is developed. Until then, markets are likely to fluctuate on the latest news of virus outbreaks, the re-opening of local and global economies, and the gradual return to work.

In Australia, the government’s economic update on 23 July should give a clearer indication of the future of JobKeeper and JobSeeker support payments. This will provide more certainty around the outlook for unemployment as well as business and consumer confidence.

The months leading up to the 3 November US Presidential election will add to global economic uncertainty and ongoing volatility on financial markets, especially if President Trump ramps up his trade war with China to shore up voter support. Once the election is out of the way, whoever wins, markets are likely to return their focus to economic fundamentals.

One thing is clear though. A well-diversified portfolio is the best way to ride out short-term market volatility and catch the uplift from market sectors and assets that continue to perform well during these turbulent times.

Want to learn more about running an SMSF?

Become a SuperGuide Premium member and access expert guides for SMSFs, on topics such as costs, compliance, administration, investment, borrowing and pensions. Discover valuable super and retirement strategies, the most popular shares, managed funds and ETFs for SMSFs, the latest super rates and thresholds, contributions caps and more.

Includes more than 600 articles, how-to guides, checklists, tips, calculators, case studies, quizzes and a monthly newsletter.

Find out more


Learn more about SMSF investment in the following SuperGuide articles:

The importance of asset allocation

February 10, 2021

SMSF investment rules: Collectables and personal use assets

October 15, 2020

What are the SMSF borrowing rules?

August 6, 2020

How to create an SMSF investment strategy (including example documents)

August 6, 2020

How to achieve genuine diversification in an SMSF

August 3, 2020

How do SMSF retirees invest?

March 14, 2020

10 steps to buying a commercial property and leasing it to your SMSF

February 12, 2020

What on earth is an in-specie transfer?

January 15, 2020

How to invest in infrastructure through an SMSF

October 1, 2019

ETFs: How do I use them and what do they cost?

June 19, 2019

SMSF guide to hedging

May 1, 2019

SMSFs and property: A Super Guide

April 5, 2019

The definitive SMSF guide to franked dividends

April 2, 2019

SMSF investment rules: What every trustee should know

February 15, 2019

Related topics

SMSF investing SMSFs

IMPORTANT: All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Learn more

© Copyright SuperGuide 2009-21. Copyright for this article belongs to SuperGuide Pty Ltd, and cannot be reproduced without express and specific consent. Learn more

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

How super works
Super for beginners
Super rules
Employers guide to super
Super contributions
Super and tax
Accessing super
Super news
Women and super
Super tips and strategies
How-to guides
Super quizzes
Superannuation Q&As
Superannuation glossary
Super funds
Best performing super funds
Super fund rankings
Best performing pension funds
Pension fund rankings
Super fund average returns
Super investing strategies
Comparing super funds
Choosing a super fund
Choosing an investment option
Super fund fees
Insurance and super
Super fund profiles
SMSFs
SMSFs for beginners
SMSF administration
SMSF checklists
SMSF compliance
SMSF investing
SMSF pensions
SMSF strategies
SMSF Q&As
Plan your retirement
Retirement planning for beginners
When should I retire?
How long will I live?
How much super do I need?
Will I get the Age Pension?
How much will I spend in retirement?
Financial advice
Retiring overseas
Preparing for retirement
Retirement planning strategies
Retirement calculators and reckoners
In retirement
Income in retirement
Super lump sums
Super pensions
Age Pension
Working in retirement
Life in retirement
Senior concessions and services
Aged care
Estate planning
Super death benefits
Advertisement
Compare super funds

Footer

Important: Disclaimer

All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs.

You should consider whether any information on SuperGuide is appropriate to you before acting on it.

If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

Learn more

About SuperGuide

SuperGuide is Australia’s leading superannuation and retirement planning website. Learn more

Superguide Pty Ltd ATF Superguide Unit Trust as a Corporate Authorised Representative (CAR) is a Corporate Authorised Representative of Independent Financial Advisers Australia, AFSL 464629

  • Contact us
  • Advertise on SuperGuide
  • Careers

Before using this website

  • New to SuperGuide?
  • Terms and Conditions of Use
  • Financial Services Guide
  • Privacy Policy and Privacy Collection
  • Copyright Policy
  • Editorial Policy and Complaints
  • Disclaimer

  • SuperGuide Premium
  • Subscriber feedback
  • Sitemap